Section ID 4 — Income Tax Act 2007: Pre-consolidation losses on entry: part-year rule

ID 4 Pre-consolidation losses on entry: part-year rule When this section applies (1) This section applies if a company that is part of a consolidated group has a loss balance to which section ID 2 applies in a tax year when the company joins the consolidated group. Limit on amount available (2) The amount of the loss balance to be made available to the consolidated group under section ID 2(2) is the lesser of the amount the company establishes in financial statements under subsection (3), or the amount calculated using the formula in subsection (4), but in either case, it must not be more than the limit set out in section ID 3(2) . Financial statements (3) The company may establish the amount to be made available by providing the Commissioner, at the time of providing the consolidated group’s return of income, with adequate financial statements that— (a) relate to the part of the tax year when the company was part of the consolidated group; and (b) disclose the amount that would be the net income attributable to the part of the tax year when the company was part of the consolidated group, determined on a fair and reasonable basis of attribution. Formula (4) The amount that may be made available under section ID 2(2) and referred to in subsection (2) is calculated using the formula— unused amount − (part-year net income + part-year net loss). Definition of items in formula (5) In the formula,— (a) unused amount is the loss balance carried forward from an earlier tax year or years that would be subtracted from the consolidated group’s net income for the tax year in the absence of section ID 3 or this section: (b) part-year net income is the company’s net income for the part of the tax year before the company joins the consolidated group: (c) part-year net loss is the amount of a pre-consolidation tax loss that must be subtracted under section ID 2 from the net income of another consolidated group of which the company was part in the tax year before joining the consolidated group referred to in subsection (1). Relationship with section ID 2 (6) This section overrides section ID 2 . Defined in this Act: amount , Commissioner , company , consolidated group , loss balance , net income , return of income , tax loss , tax year , Compare: 2004 No 35 s IG 6(7)