Utilitisation rate calculation

1. Click Preparation > Schedule > Consolidated Losses Worksheet

2. Select the transferor

3. Click Rates.

4. Select the rate

5. Click Properties.

6. From either the foreign or non-foreign rate field click [F10] to open the calculator.

When a loss bundle is created a utilisation rate is calculated for it. This determines the rate at which the losses contained in the bundle can be used to offset assessable income for that bundle.

After a bundle has been created, there are five events that require the utilisation rate to be recalculated. For instance when a new entity joins the group bringing loss bundles with it, the utilisation rate needs to be recalculated. Each of these events has a fraction that is applied to the current utilisation rate in order to adjust it for the event that has occurred.

Tax employs a calculator screen to determine the utilisation rate. The values entered are not retained once the calculator screen is closed. They are simply used to determine the available fraction that is applicable to the bundle. There are 6 events that can cause the available fraction of a loss bundle to be recalculated.

During the transitional period of consolidation the concessional method allows certain continuity of ownership losses to be utilised over three years. To use this method the value donor concession must be selected when creating bundles. The higher utilisation rate achieved under these circumstances is not applicable to foreign losses contained the loss bundle created.

The amount of a concessional loss that can be utilised is as follows:

• Year 1: (the year that the loss is transferred) Amount of concessional loss x 1/3

• Year 2: Amount of concessional loss x 2/3) – amount that has been utilised in a prior period

• Year 3: Amount of concessional loss – amount that has been utilised in a prior period.

The available fraction method treats each category of income separately to determine the maximum amount of losses that can be utilised from each bundle. The available fraction is determined depending on the event type and whether the value donor concession has been selected for the joining entity or not.

 

Event	Reason for Transfer	Data required from which to calculate the utilisation rate
1	Bundle created	Enter as integers: the Market Value of the Joining Entity the Market Value of the Consolidated Group
1	Bundle created with value donor selected	Enter as integers: the Modified Market value of the joining entity the percentage of the market value of the joining entity to be used the sum of the Division 170 losses in this bundle the sum of the non-foreign losses in this bundle
2, 3, 4, 5 or 6	Any event except bundle created	Previous available fraction for Non-Foreign and Foreign Losses: For the first utilisation rate calculated these values will default to zero. Otherwise these values are provided from the previous entry in the rate index.
2 or 5	Transferred to a new head company OR Increase in market value of group	Enter as integers: the market value of the group before the event the market value of the group after the event
3	Transferred to new head company (with group losses)	Enter as numbers less than one: the available fraction for group losses transferred the sum of available fractions for all bundles of losses transferred.
4	Group acquires new loss bundles	Enter a number less than one: the sum of available fractions for all bundles of losses transferred.
6	Total of available fractions greater than 1	Enter the sum of available fractions for all bundles (a number less than one).
n/a	Calculations resulting from the data entered.	The Available Fraction – Non-foreign and the Available Fraction – Foreign are calculated.

One event may cause more than one adjustment to be made to the available fraction. For example if an existing consolidated group transfers losses to a new group, where the new group has existing loss bundles. If more than one event is being considered, then the adjustment calculations are made in the order 1 - 6, with the results of earlier calculations being used in subsequent calculations.