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IP 5: Breach in tax year in which loss balance is grouped
or “Rules for sharing company losses within a group when ownership changes”
You could also call this:

“When you need to provide financial statements for tax loss purposes”

You need to provide financial statements to the Commissioner in certain situations. These statements are important for dealing with tax losses.

If you’re a company, you must give financial statements for the continuity period as mentioned in sections IP 3 and IP 3B. This helps show that your company has continued to operate during this time.

If you’re company A in a group, you need to provide financial statements for the common span. These statements should show how you calculated your tax loss component. You need to do this in a fair and reasonable way.

If you’re company B in a group, you also need to give financial statements for the common span. These should show how you worked out your net income during this time. Again, you need to do this fairly and reasonably.

The common span is a specific period of time in the tax year when you’re using a tax loss or loss balance. It includes the time when both companies are in the same group. During this time, both companies must always be part of the same group. Company A also needs to meet certain continuity requirements.

When you’re preparing these financial statements, you should try to follow the rules in the Income Tax Act as if the common span was a full tax year.

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Next up: IP 7: Notices required

or “Companies must notify the government about using tax losses by the tax return due date”
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Part I Treatment of tax losses
Meeting requirements for part-years

IP 6Financial statements required

  1. For the purposes of this subpart, a company must provide the Commissioner with adequate financial statements under section IP 3(2)(c) and (4)(b) relating to the continuity period.

  2. For the purposes of this subpart, a company must provide the Commissioner with adequate financial statements under section IP 3B(2)(c) relating to the continuity period.

  3. For the purposes of this subpart, company A must provide the Commissioner with adequate financial statements under section IP 4(2)(c) relating to the common span, calculating the amount of the tax loss component, determined on a fair and reasonable basis of attribution.

  4. For the purposes of this subpart, company B must provide the Commissioner with adequate financial statements under sections IP 4(2)(c) and IP 5(2)(c) relating to the common span, calculating the amount of the net income in the common span, determined on a fair and reasonable basis of attribution.

  5. For the purposes of subsections (2) and (3), if the balance dates of company A and company B differ, the common span is taken as the period of time in the tax year in which the tax loss or loss balance is used—

  6. that includes, but is not limited to, all or part of the tax year in which company A is in the same group of companies as company B; and
    1. in which company A and company B are at all times part of the same group of companies; and
      1. in which company A meets the continuity requirements of section IC 2(1) (Threshold levels for grouping tax losses in tax year).

        1. In preparing the financial statements described in this section, the company must, to the extent possible, apply the provisions of this Act to the common span as if it were a tax year.

        Compare
        Notes
        • Section IP 6(1B) heading: inserted (with effect on 1 April 2020), on , by section 127(1) (and see section 127(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
        • Section IP 6(1B): inserted (with effect on 1 April 2020), on , by section 127(1) (and see section 127(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).