CHAPTER 3
-
SPECIALIST LIABILITY RULES
PART 3-90
-
CONSOLIDATED GROUPS
History
Part 3-90 inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
Division 705
-
Tax cost setting amount for assets where entities become subsidiary members of consolidated groups
History
Div 705 inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
Subdivision 705-A
-
Basic case: a single entity joining an existing consolidated group
History
Subdiv 705-A inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
Tax cost setting amount for assets that joining entity brings into joined group
SECTION 705-25
Tax cost setting amount for retained cost base assets
705-25(1)
This section states what the
*
tax cost setting amount is for a
*
retained cost base asset.
Australian currency
705-25(2)
If the
*
retained cost base asset is covered by paragraph (a), (b) or (ba) of the definition of that expression and is not covered by another subsection of this section, its
*
tax cost setting amount is equal to the amount of the Australian currency concerned.
History
S 705-25(2) amended by No 56 of 2010, s 3 and Sch 5 item 120, by substituting
"
paragraph (a), (b) or (ba)
"
for
"
paragraph (a) or (b)
"
. No 56 of 2010, s 3 and Sch 5 item 126 contains the following application provision:
Application provision
(1)
The amendments made by Division 1 of this Part apply in relation to a consolidated group or MEC group on and after:
(a)
if the head company of the group makes a choice in accordance with subitems (2) and (3)
-
1 July 2002; or
(b)
otherwise
-
the day on which the Bill that became this Act was introduced into the House of Representatives.
(2)
A choice mentioned in paragraph (1)(a) must be made:
(a)
on or before 30 June 2011; or
(b)
within a further time allowed by the Commissioner.
(3)
A choice mentioned in paragraph (1)(a) must be made in writing.
(4)
The amendments made by Division 2 of this Part apply in relation to a consolidated group or MEC group on and after 1 July 2002.
Qualifying securities
705-25(3)
If the
*
retained cost base asset is a qualifying security (within the meaning of Division
16E
of Part
III
of the
Income Tax Assessment Act 1936
), the
*
tax cost setting amount for the qualifying security is instead equal to the joining entity
'
s
*
terminating value for the asset.
Entitlements to pre-paid services etc.
705-25(4)
If the
*
retained cost base asset is covered by paragraph (c) of the definition of that expression, its
*
tax cost setting amount is equal to the amount of the deductions to which the
*
head company is entitled under section
701-5
(the entry history rule) in respect of the expenditure that gave rise to the entitlement.
Note:
If the total amount to be treated as tax cost setting amounts for retained cost base assets exceeds the joined group
'
s allocable cost amount for the joining entity, the head company makes a capital gain equal to the excess: see CGT event L3.
History
S 705-25(4) amended by No 16 of 2003, s 3 and Sch 21 item 5, by inserting
"
: see CGT event L3
"
at the end of the note, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
Financial arrangements to which Subdivision 250-E applies
705-25(4A)
The *tax cost setting amount is instead equal to the joining entity
'
s *terminating value for the *retained cost base asset if the asset is a *financial arrangement to which Subdivision
250-E
applies immediately before the joining time.
History
S 705-25(4A) inserted by
No 164 of 2007
, s 3 and Sch 1 item 63, effective 25 September 2007.
Rights to payments in respect of uncompleted work etc
705-25(4B)
If the *retained cost base asset is covered by paragraph (d) or (e) of the definition of that expression, its *tax cost setting amount is equal to the joining entity
'
s *terminating value for the asset.
History
S 705-25(4B) amended by No 59 of 2019, s 3 and Sch 2 item 13, by inserting
"
or (e)
"
, effective 30 August 2019.
S 705-25(4B) inserted by No 56 of 2010, s 3 and Sch 5 item 123, applicable in relation to a consolidated group or MEC group on and after 1 July 2002.
Retained cost base asset
705-25(5)
A
retained cost base asset
is:
(a)
Australian currency, other than
*
trading stock or
*
collectables of the joining entity; or
(b)
a right to receive a specified amount of such Australian currency, other than a right that is a marketable security within the meaning of section
70B
of the
Income Tax Assessment Act 1936
; or
Example:
A debt or a bank deposit.
(ba)
a unit in a *cash management trust, if:
(i)
the redemption value of the unit is expressed in Australian dollars; and
(ii)
the redemption value of the unit cannot increase; or
(c)
a right to have something done under an
*
arrangement under which:
(i)
expenditure has been incurred in return for the doing of the thing; and
(ii)
the thing is required or permitted to be done, or to cease being done, after the expenditure is incurred; or
(d)
a
*
right to future income (other than a
*
WIP amount asset); or
(e)
a *depreciating asset that the joining entity *holds as a result of a *balancing adjustment event mentioned in paragraph
417-30(2)(b)
.
Note 1:
There are some additional retained cost base assets for a joining entity that is a life insurance company: see Subdivision
713-L
. The tax cost setting amount for those assets is worked out under that Subdivision.
Note 2:
The joining entity
'
s right to receive lease payments under a lease is treated as a retained cost base asset in some circumstances (see paragraph
705-56(3)(b)
).
History
S 705-25(5) amended by No 127 of 2021, s 3 and Sch 3 item 65, by omitting
"
finance
"
before
"
lease
"
from note 2, effective 1 January 2022 and applicable in relation to an entity that becomes, on or after 1 January 2019, a subsidiary member of a consolidated group or a subsidiary member of a MEC group.
S 705-25(5) amended by No 59 of 2019, s 3 and Sch 2 items 14 and 15, by substituting
"
asset); or
"
for
"
asset).
"
in para (d) and inserting para (e), effective 30 August 2019.
S 705-25(5) amended by No 99 of 2012, s 3 and Sch 3 item 36, by substituting para (d), effective 29 June 2012. For application provisions see note under s
701-55(5C)
. Para (d) formerly read:
(d)
a right that is an asset covered by section
716-410
(rights to amounts that are expected to be included in assessable income) if at the time the right was created:
(i)
the *head company was the head company of a *consolidatable group; and
(ii)
the joining entity was a *subsidiary member of the consolidatable group.
S 705-25(5) amended by No 99 of 2012, s 3 and Sch 3 item 21, by substituting
"
a right that is an asset covered by section 716-410 (rights to amounts that are expected to be included in assessable income)
"
for
"
a right that is an
*
unbilled income asset
"
in para (d), effective 29 June 2012. For application provisions see note under s
701-55(5C)
.
S 705-25(5) amended by No 99 of 2012, s 3 and Sch 1 item 8, by substituting
"
a right that is an *unbilled income asset
"
for
"
a right that is an asset covered by section 716-410 (rights to future amounts that are expected to be included in assessable income)
"
in para (d), effective 29 June 2012. For application provisions see note under s
701-55(5C)
.
S 705-25(5) amended by No 41 of 2011, s 3 and Sch 5 item 417, by omitting
"
; or
"
(last occurring) after
"
incurred
"
from para (c)(ii), effective 27 June 2011.
S 705-25(5) amended by No 56 of 2010, s 3 and Sch 5 items 124 and 125, by inserting para (d), applicable in relation to a consolidated group or MEC group on and after 1 July 2002.
S 705-25(5) amended by No 56 of 2010, s 3 and Sch 5 item 121, by inserting para (ba). For application provision see note under s 705-25(2).
S 705-25(5) amended by No 23 of 2005.
S 705-25(5) amended by No 16 of 2003, s 3 and Sch 6 item 6, by inserting the note at the end, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
S 705-25 inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
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