Income Tax Assessment Act 1997



Division 705 - Tax cost setting amount for assets where entities become subsidiary members of consolidated groups  

Subdivision 705-A - Basic case: a single entity joining an existing consolidated group  

Tax cost setting amount for assets that joining entity brings into joined group

SECTION 705-40   Tax cost setting amount for reset cost base assets held on revenue account etc.  


The * tax cost setting amount for a reset cost base asset that is * trading stock, a * depreciating asset, a * registered emissions unit or a * revenue asset must not exceed the greater of:

(a) the asset ' s * market value; and

(b) the joining entity ' s * terminating value for the asset.


If subsection (1) reduces the asset ' s * tax cost setting amount, the amount of the reduction is allocated among the other reset cost base assets (including other * trading stock, * depreciating assets, *registered emissions units and * revenue assets), so as to increase their tax cost setting amounts, in accordance with the principles set out in subsection (3).

If any of the amount of the reduction cannot be allocated, it is instead treated as a capital loss of the head company: see CGT event L8.

These are the principles:

(a) the allocation is to be in proportion to the * market values of the assets;

(b) the amount allocated to an item of * trading stock, to a * depreciating asset, to a *registered emissions unit or to a * revenue asset must not cause its * tax cost setting amount to contravene subsection (1);

(c) any of the amount that cannot be allocated is to be reallocated, to the maximum extent possible, among the remaining reset cost base assets by applying this subsection a further one or more times.

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