IRD has released a draft Standard Practice Statement – SPS 05/12 for consultation setting out certain practices that will be acceptable to the Commissioner for offsetting losses between group companies.
However the statement is not a completely comprehensive guide to the rules under sub-part IC in the Income Tax Act.
The purpose of the loss offset provisions is to place a group of companies with 66% common ownership carrying on separate activities in the same position as a single company carrying on several activities.
What the statement does cover is the Commissioners expectation in terms of giving notice, making a valid election, including late elections and extensions, and the requirements around subvention payments.
Also covered in detail is how part-year losses are able to be offset in certain cases, and how these should be treated.
The statement also explains what should happen when the loss company’s loss, or profit companies profit is increased or reduced through an amended assessment.
The statement is useful in terms of stepping you through the processes required to utilise tax losses. Feedback on the draft should be submitted by 18 August 2017.