› Whether choice to cancel must be made in relation to joining year
› Whether choice made in later income year effective
› Income Tax Assessment Act 1997 (Cth), ss 707-120, 707-145
Taxation
› Income Tax
› Consolidated groups
› Allocable cost amount
› Tax cost setting amount
› Interaction between loss transfer cancellation and allocable cost amount calculation
› Absence of statutory mechanism for recalculation after joining year
› Income Tax Assessment Act 1997 (Cth), ss 705-60, 705-110, Subdiv 705-E
Statutes
› Construction
› Implication from statutory context and purpose
› Whether words should be read into provision
› Distinction between reading in words and identifying meaning implicit in statutory language
› Absence of express time limitation
› Significance of absence of ancillary provisions for recalculation
Quick Take
1A choice under s 707-145(1) of the ITAA 1997 to cancel the automatic transfer of losses from a joining entity to the head company of a consolidated group must be made in relation to the joining year (the income year in which the joining time occurred), and cannot be made in relation to a later income year.
2The absence of any statutory mechanism in Part 3-90 to recalculate the allocable cost amount, adjust the available fraction under s 707-320(2), or amend assessments out of time under s 170 of the ITAA 1936 following a post-joining-year cancellation choice provides a strong contextual indication that such a later choice was not contemplated by the legislature.
3The Commissioner's alternative constructions — that the transfer is 'spent' once losses are utilised, or that the head company 'waives' its right to cancel upon utilisation — find no support in the statutory text and are inconsistent with accepted principles of statutory construction.
