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IQ 7: When group membership lacking in loss period
or “Rules for using overseas tax losses when a company joins a group”
You could also call this:

“How tax deductions work when a company joins a group with overseas investment losses”

This section talks about what happens when a company joins a group of companies for tax purposes. It applies when the company has some special kinds of losses from overseas investments that it needs to use in that tax year.

The amount the group can take off their income for tax purposes is the smaller of two amounts:

  1. The amount the company could take off its own income for the part of the year it wasn’t in the group, plus any amount it could take off the income of another group it was part of before joining this one.

  2. The amount that would be the group’s income for the part of the year the company was in the group. To work this out, you need to give the tax office some financial statements that show how much of the group’s income came from the company during that time.

These financial statements need to be fair and reasonable in how they work out the company’s share of the group’s income.

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Next up: IQ 9: When attributed CFC net loss becomes FIF net loss

or “When a foreign company loss changes from one type to another”
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Part I Treatment of tax losses
Attributed controlled foreign company net losses and foreign investment fund net losses

IQ 8When group membership lacking in tax year of use

  1. This section applies if a company joins a consolidated group in a tax year with a ring-fenced tax loss consisting of an attributed CFC net loss or FIF net loss, or both, carried forward to the tax year, which must be used in the tax year under section IQ 6.

  2. The amount that may be subtracted from the net income of the consolidated group for the tax year under section ID 2(2) is the lesser of—

  3. the amount of ring-fenced tax loss referred to in section IQ 7(1) that the company could subtract from—
    1. the amount that would be the company’s net income for the part of the tax year in which it was not part of a consolidated group; and
      1. the net income for the tax year of another consolidated group of which the company was part before joining the present group; and
      2. the amount that would be the group’s net income for the part of the tax year in which the company was part of the consolidated group, established by giving the Commissioner, at the time of providing the group’s return of income for the tax year, adequate financial statements that—
        1. relate to the part of the tax year when the company was part of the group; and
          1. disclose the amount that would be the company’s net income for the part of the tax year in which the company was part of the consolidated group, determined on a fair and reasonable basis of attribution.

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          Notes
          • Section IQ 8(1): amended (with effect on 1 April 2008), on , by section 67(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
          • Section IQ 8(2)(a): amended (with effect on 1 April 2008), on , by section 67(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).