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DV 23: Losses for QCs entering look-through companies rules
or “Tax deductions for losses when a qualifying company becomes a look-through company”
You could also call this:

“Tax losses from qualifying companies can be used when becoming a sole trader”

This law applies to you if you used to own a qualifying company that has now become a sole tradership. If your company would have had losses to carry forward when it changed to a sole tradership, you can still use some of those losses in your new business.

The law cancels any losses from before the change, but it lets you claim a deduction for some of those cancelled losses. The amount you can claim is equal to the losses that were cancelled, minus any deductions you’ve already claimed for those losses in previous years.

There are some limits on this deduction. If the losses came from overseas investments, you might not be able to claim all of them. You can only claim up to the amount you’re allowed to subtract from your income under the rules for foreign losses.

This law overrides other general rules about what you can and can’t claim as a deduction.

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Next up: DV 25: Hedging of currency movements in Australian non-attributing shares and attributing FDR method interests

or “Tax relief for protecting Australian investments against currency changes”
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Part D Deductions
Expenditure specific to certain entities

DV 24Losses for QCs becoming sole traderships

  1. This section applies to a person when,—

  2. for an income year, the person's sole tradership has effectively replaced a qualifying company under a QCST transitional process; and
    1. ignoring the application of section HZ 4D(3) (Qualifying companies: transition into sole traderships), the company would have had a loss balance to carry forward to the first or second income year, as applicable, starting on or after 1 April 2011 (the relevant transitional income year).

      1. Despite section HZ 4D(3), for the relevant transitional income year and subsequent income years, a loss balance under Part I (Treatment of tax losses) is cancelled if the loss balance arose in relation to an income year before the relevant transitional income year.

      2. The person is allowed a deduction for an amount equal to an amount given by the formula in subsection (4).

      3. For the purposes of subsection (3), the amount is calculated using the following formula:

        loss balance extinguished − subsequent deductions.

        Where:

        • In the formula,—

        • loss balance extinguished is the loss balance cancelled under subsection (2):
          1. subsequent deductions is the total amount of deductions allowed for previous income years under this section.

            1. Despite subsection (3), a person is denied a deduction for an amount in subsection (4) to the extent to which—

            2. it arises from an amount carried forward under subparts IA and IQ (which relate to the treatment of foreign losses); and
              1. it is greater than the maximum amount they may subtract from their net income under subpart IQ, treating the amount as an attributed CFC net loss or a FIF net loss carried forward under subpart IQ.

                1. This section overrides the general permission and the general limitations.

                Notes
                • Section DV 24: added, on (applying for income years beginning on or after 1 April 2011), by section 45(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).