Ring-fenced losses of controlled foreign companies - losses incurred prior to active income exemption

Section IQ 2 of the Income Tax Act 2007

Section IQ 2 has been substantially redrafted as part of an exercise to improve the clarity of subpart IQ in the rewritten Income Tax Act.

One effect of the redrafting is to clarify the application of the transitional rules in section IQ 2B. Section IQ 2B applies to losses incurred before an active income exemption for controlled foreign companies was introduced.

It is now clear that section IQ 2B applies to losses made available to a taxpayer by other companies in the same group, as well as to the taxpayer's own carried-forward losses.

Application date

The relevant changes apply for income years beginning on or after 1 July 2009.