Income Tax (Transitional Provisions) Act 1997

The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if:

the group came into existence at a particular time (the formation time) before 1 July 2004; and

apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and

the transitional time is not later than 3 years after the formation time; and

the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and

the continuous ownership condition in subsection (2) is satisfied; and

the foreign loss condition in subsection (3) is satisfied; and

the no‑subsidiary condition in subsection (4) is satisfied.

The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period:

beginning at the start of 1 July 2002; and

ending at the transitional time.

The foreign loss condition is satisfied if:

the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and

the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and

assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997.

The no‑subsidiary condition is satisfied if, at the transitional time:

the transitional foreign loss maker does not hold any membership interests in any other entity; or

both of the following conditions are satisfied:

the transitional foreign loss maker holds one or more membership interests in one or more other entities;

assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group.

To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of:

subsection 126‑50(6) of the Income Tax Assessment Act 1997; and

paragraphs 170‑5(2A)(b) and 170‑105(2A)(b) of that Act; and

subparagraph 820‑599(1)(b)(iii) of that Act.