26CDeduction for tax loss—easing of restrictions on transferring corporation

26C Deduction for tax loss—easing of restrictions on transferring corporation

(1) If: (a) this Act applies to one or more transfers by the transferring corporation to the receiving corporation; and (b) the transferring corporation is taken (otherwise than because of a transfer of a tax loss under former section 80G of the Income Tax Assessment Act 1936 or under Subdivision 170‑A of the Income Tax Assessment Act 1997) to have incurred a tax loss for a year of income (the loss year); and (c) the loss year is the income year in which former section 26 of this Act commenced or an earlier income year; and (d) Subdivision 165‑A or 175‑A, or both, of the Income Tax Assessment Act 1997 prevent the transferring corporation from deducting an amount of that tax loss for an income year (the deduction year); and (e) the transferring corporation did not, at any time in the deduction year, derive income from: (i) a business of a kind that it did not carry on; or (ii) a transaction of a kind that it had not entered into in the course of its business operations; before the transfer, or the earliest of the transfers, occurred; neither Subdivision 165‑A nor 175‑A of that Act prevents the transferring corporation from deducting that amount.

Note: Subdivision 165‑A of the Income Tax Assessment Act 1997 is about the conditions that a company needs to satisfy before it can deduct a tax loss from an earlier income year.

Note: Subdivision 175‑A of the Income Tax Assessment Act 1997 is about the Commissioner preventing a company from getting certain tax benefits through its unused tax losses.

(2) Subsection (1) operates on the basis described in subsection (3) if: (a) the head company of a consolidated group or MEC group incurred a tax loss because of Subdivision 707‑A of the Income Tax Assessment Act 1997; and (b) the company (the real loss‑maker) that incurred the tax loss apart from that Subdivision is a member of the group in the deduction year; and (c) disregarding section 701‑1 (the single entity rule) of that Act, this Act applies to one or more transfers by the real loss‑maker to the receiving corporation.

Note: In certain cases, Subdivision 707‑A of the Income Tax Assessment Act 1997 treats the head company of a consolidated group or MEC as incurring a tax loss actually incurred by an entity that becomes a member of the group.

(3) Subsection (1) operates as if: (a) the head company were the transferring corporation in relation to each transfer described in paragraph (1)(a) and this Act applied to each of those transfers; and (b) the head company incurred the tax loss for the income year for which the real loss‑maker incurred it (apart from Subdivision 707‑A of the Income Tax Assessment Act 1997); and (c) each reference in that subsection to Subdivision 165‑A of that Act were a reference to that Subdivision as its operation is affected by Subdivision 707‑B of that Act, and by Subdivision 719‑F of that Act (if relevant).