Income Tax Assessment Act 1997
(a) a *retained cost base asset of the joining entity is a right to receive a specified amount of such Australian currency, covered by paragraph 705-25(5)(b) ; and
(b) the *market value of the asset is less than the *tax cost setting amount of the asset; and
(c) the head company makes a *capital gain under *CGT event L3 (disregarding this subsection) as a result of the joining entity becoming a *subsidiary member of the group;
reduce the tax cost setting amount of the asset by the amount of the gain (but not below zero).
Reducing the tax cost setting amount of the asset will also reduce the amount of the capital gain (see paragraph 104-510(1)(b) ). The amount of the capital gain might be reduced to nil.705-27(2)
(a) the requirements in subsection 701-58(1) (intra-group assets) are satisfied in relation to the asset; and
(b) the joining entity has been entitled to a deduction for an income year ending on or before the joining time because of the *market value of the asset being less than the specified amount mentioned in paragraph (1)(a); and
(c) the accounting liability that corresponds to the asset has not been reduced under subsection 705-75(2) ;
reduce the amount of the reduction under subsection (1) by the amount of the deduction (but not below zero).705-27(3)
If the *tax cost setting amount of 2 or more of the joining entity's assets could be reduced in accordance with subsections (1) and (2):
(a) subsections (1) and (2) apply sequentially to each of those assets; and
(b) the *head company may choose the sequence of assets to which subsections (1) and (2) apply; and
(c) if the head company does not make such a choice - subsections (1) and (2) apply sequentially to each of those assets according to the time at which they were created, from earliest to latest.
Once the amount of the capital gain is reduced to nil as a result of the application of subsections (1) and (2), no further reductions of tax cost setting amount can be made under those subsections.705-27(4)
A choice the *head company can make under paragraph (3)(b) must be made:
(a) by the day the head company lodges its *income tax return for the income year in which the *CGT event happened; or
(b) within a further time allowed by the Commissioner. 705-27(5)
The way the *head company prepares its *income tax return is sufficient evidence of the making of the choice.