In Evolution Mining Limited v Commissioner of Taxation [2026] FCA 935, the Court determined a separate question concerning whether the choice made in Part B of the losses schedule to Evolution’s 2014 income tax return, was effective for the purposes of s 707-145 of the Income Tax Assessment Act 1997 (Cth) to cancel any transfer of Tax Losses in an acquired entity. Jackman J held that the answer was no.
Evolution acquired another business, Conquest, in 2011, and Conquest become a subsidiary. Conquest had reported losses of $31,292,880 in the income years 2007 to 2010. In Evolution’s 2012 and 2013 tax returns, it did not exercise any choice under s 707-145 of the ITAA 1997 to cancel the transfer of the updated Conquest tax losses. In Evolution’s 2014 return, it recorded the cancellation of the transfer of losses which included the Conquest tax losses.
Evolution contended that cancellation was late and of no effect, on the basis that the choice “must be made in relation to the income year in which the joining entity became a member of the consolidated group.” The determination depended on the construction of s 707-145(1) of the Act, which provides “the head company of the joined group may choose to cancel the transfer of the loss”. Cancelling a transfer impacts the allocable cost amount for a joining entity.
Jackman J, emphasising the importance of purpose and overall statutory context, preferred Evolution’s construction of 707-145, including observing at [89] that “the absence of any mechanism to deal with the obvious potential and problematic consequences of a choice to cancel the transfer being made in relation to an income year after the joining year provides a strong indication that the choice to cancel the transfer (like the transfer itself) is contemplated as necessarily taking root in various aspects of the tax profile of the head company in the joining year … As Evolution submits, its construction is consistent with that purpose, and avoids the kind of outcomes illustrated by its worked examples, which are inconsistent with that purpose.”
Kristen Deards SC and Ryan May appeared for Evolution Mining, instructed by Corrs Chambers Westgarth.