Part D
Deductions
Expenditure specific to certain entities
DV 24Losses for QCs becoming sole traderships
This section applies to a person when,—
- for an income year, the person's sole tradership has effectively replaced a qualifying company under a QCST transitional process; and
- 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).
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.
The person is allowed a deduction for an amount equal to an amount given by the formula in subsection (4).
For the purposes of subsection (3), the amount is calculated using the following formula:
Where:
In the formula,—
- loss balance extinguished is the loss balance cancelled under subsection (2):
- subsequent deductions is the total amount of deductions allowed for previous income years under this section.
Despite subsection (3), a person is denied a deduction for an amount in subsection (4) to the extent to which—
- it arises from an amount carried forward under subparts IA and IQ (which relate to the treatment of foreign losses); and
- 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.
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).