New Business Tax System (Consolidation and Other Measures) Act 2003 (16 of 2003)

Schedule 7   Consolidation: interactions between Consolidation rules and other rules

Part 1   New Division 715 inserted in the Income Tax Assessment Act 1997

1   After Division 713

Insert:

Division 715 - Interactions between this Part and other areas of the income tax law

Table of Subdivisions

715-A Treatment of unrealised losses existing when ownership or control of a company changes before or during consolidation

715-B How Subdivision 165-CD applies to consolidated groups and leaving entities

715-C Common rules for the purposes of Subdivisions 715-A and 715-B

715-D Treatment of company's deferred losses under Subdivision 170-D on joining a consolidated group

715-G How value shifting rules apply to a consolidated group

715-H Cancelling loss on realisation event for direct or indirect interest in a subsidiary member of a consolidated group

Subdivision 715-A - Treatment of unrealised losses existing when ownership or control of a company changes before or during consolidation

Table of sections

Object

715-15 Object of this Subdivision

Effect on Subdivision 165-CC of a company becoming a member of a consolidated group

715-25 Subdivision 165-CC stops applying to earlier changeover time

715-30 Meaning of 165-CC tagged asset

715-35 Meaning of final RUNL

165-CC tagged assets that affect tax cost setting amounts

715-50 Step 1 amount is reduced if membership interest in subsidiary member is 165-CC tagged asset and same business test is failed

715-55 Step 2 amount is affected if liability of subsidiary member is 165-CC tagged asset of another group member and same business test is failed

165-CC tagged assets that form loss denial pools of head company when consolidated group is formed

715-60 Assets that the head company already owns

715-70 Assets of subsidiary member that become those of head company

How Subdivision 165-CC applies to consolidated groups

715-75 Extension of single entity rule and entry history rule

Effect on Subdivision 165-CC of entity leaving consolidated group

715-80 Application of sections 715-85 to 715-110

715-85 First changeover time for leaving company at or after leaving time

715-90 How same business test applies if leaving time is changeover time for leaving company

715-95 If ownership and control of leaving entity have not changed since head company's last changeover time

715-100 First choice: adjustable values of leaving assets reduced to nil

715-105 Second choice: head company's final RUNL applied in reducing adjustable values of leaving assets that are loss assets

715-110 Third choice: loss denial pool of leaving entity created

Effect of assets in loss denial pool of head company becoming assets of leaving entity

715-120 What happens

715-125 First choice: adjustable values of leaving assets reduced to nil

715-130 Second choice: pool's loss denial balance applied in reducing adjustable values of leaving assets that are loss assets

715-135 Third choice: loss denial pool of leaving entity created

Effect of first and second choices on various kinds of assets

715-145 Effect of choice on adjustable value of leaving asset

General provisions about loss denial pools

715-155 When asset leaves pool

715-160 How loss denial balance is applied to losses realised on assets in pool

715-165 When pool ceases to exist

Choices under this Subdivision

715-175 When choice must be made

715-180 Head company to notify leaving entity of choice

715-185 Leaving entity may choose to cancel loss denial pool by reducing adjustable values of assets in the pool

Object

715-15 Object of this Subdivision

(1) The object of this Subdivision is to give effect to the purposes of Subdivision 165-CC (about change of ownership or control of a company that has an unrealised net loss) in these cases:

(a) on formation of a *consolidated group, a *CGT asset held directly by the *head company is affected by that Subdivision, and the *same business test is failed;

(b) on an entity becoming a *subsidiary member of a consolidated group, an asset consisting of:

(i) a *membership interest that a *member of the group (including a chosen transitional entity under Division 701 of the Income Tax (Transitional Provisions) Act 1997) holds in the entity; or

(ii) a liability that the entity owes to such a member;

is affected by that Subdivision, and the same business test is failed;

(c) on a company becoming a subsidiary member:

(i) a CGT asset of the company that becomes an asset of the head company is affected by that Subdivision; and

(ii) because the company is a chosen transitional entity, the asset does not have its tax cost reset; and

(iii) the same business test is failed;

(d) on an entity ceasing to be a subsidiary member, a CGT asset of the head company that becomes an asset of the entity is affected by that Subdivision, and the same business test is failed.

Note: Subdivision 165-CC also affects an entity that has deferred losses under Subdivision 170-D on assets that it formerly owned. Subdivision 715-D gives effect to the purposes of Subdivision 165-CC if such an entity becomes a member of a consolidated group.

(2) This Subdivision achieves its object by supplementing and modifying the application of Subdivision 165-CC to take account of how the rest of this Part treats *members of a *consolidated group (in particular the provisions about entities becoming or ceasing to be members).

[The next section is section 715-25.]

Effect on Subdivision 165-CC of a company becoming a member of a consolidated group

715-25 Subdivision 165-CC stops applying to earlier changeover time

(1) At and after the time (the membership time ) when a company becomes a *member of a *consolidated group, Subdivision 165-CC does not apply to the company in relation to a *changeover time that happened before the membership time, except for the purposes of section 715-30 (which defines 165-CC tagged asset ).

Note 1: Subdivision 165-CC is about change of ownership or control of a company that has an unrealised net loss.

Note 2: If the company has 165-CC tagged assets at the membership time, there are further consequences under this Subdivision and Subdivision 715-D.

Also, Subdivision 165-CC can apply to the head company of the group in relation to a changeover time that happens for it at or after the membership time. See section 715-75.

(2) Subsection (1) continues to have effect even if the company later stops being a *member of the group.

715-30 Meaning of 165-CC tagged asset

A *CGT asset is a 165-CC tagged asset of a company at a particular time if, and only if:

(a) that time is at or after the most recent *changeover time (if any) for the company; and

(b) at that changeover time, the company had an unrealised net loss under section 165-115E; and

(c) the asset is covered by subsection 165-115A(1A) as applying to that changeover time; and

(d) the company would not, at that changeover time, satisfy the maximum net asset value test under section 152-15; and

(e) if the company has chosen under subsection 165-115A(1B) in relation to that changeover time - the company *acquired the asset for $10,000 or more.

715-35 Meaning of final RUNL

A company's final RUNL at a particular time (the test time ) is the amount that would have been the company's *residual unrealised net loss at the time of:

(a) if no event that subsection 165-115BB(2) refers to as a relevant event actually happens at the test time - a notional event of that kind happening at the test time; or

(b) otherwise - a notional event of that kind that happens at the test time, and that the company determines under paragraph 165-115BB(1)(b) to have happened later than each event that actually happened at that time.

Note: This Subdivision reduces a company's final RUNL as amounts of it are applied for various purposes.

[The next section is section 715-50.]

165-CC tagged assets that affect tax cost setting amounts

715-50 Step 1 amount is reduced if membership interest in subsidiary member is 165-CC tagged asset and same business test is failed

(1) The amount taken into account under subsection 705-65(1) (about the cost of membership interests in the joining entity) for a *membership interest that a *member of the joined group holds in the joining entity at the joining time is reduced if:

(a) apart from this section, the amount would be the membership interest's *reduced cost base (if appropriate, as modified by a later provision of section 705-65); and

(b) the membership interest is at that time a *165-CC tagged asset of that member, and that member owned it at the *changeover time for that member; and

(c) that member's *final RUNL just before the joining time was greater than nil; and

(d) that member does not satisfy the *same business test for:

(i) the period (the same business test period ) consisting of the *head company's *trial year; and

(ii) the time (the test time ) just before the *changeover time.

(2) If at the joining time that *member holds:

(a) 2 or *more membership interests in the joining entity; or

(b) at least one membership interest in the joining entity, and at least one membership interest in another member of the joined group;

this section applies to each such membership interest in whichever order that member determines.

Amount of reduction

(3) The amount taken into account under subsection 705-65(1) is reduced to the *membership interest's *market value at the joining time.

(4) However, if that member's *final RUNL (as reduced by any previous reductions under this section) is less than the difference between:

(a) the *reduced cost base referred to in paragraph (1)(a); and

(b) the *market value referred to in subsection (3);

the amount taken into account under subsection 705-65(1) is instead reduced by that final RUNL.

(5) That *final RUNL is reduced by the amount of the reduction under subsection (3) or (4).

Rights and options to acquire membership interests

(6) Subsection 705-65(6) (which treats rights and options as membership interests) also applies for the purposes of this section.

715-55 Step 2 amount is affected if liability of subsidiary member is 165-CC tagged asset of another group member and same business test is failed

(1) The amount (the comparison amount ) applicable under the table in subsection 705-75(2) (about reduction of the step 2 amount) for an accounting liability of the joining entity that is owed to a *member of the joined group at the joining time is reduced if:

(a) apart from this section, the comparison amount would be the *reduced cost base (if appropriate, as modified by a later provision of section 705-75) of the asset of that member that is constituted by the accounting liability; and

(b) the asset is at that time a *165-CC tagged asset of that member, and that member owned it at the *changeover time; and

(c) that member's *final RUNL just before the joining time (as reduced by any reductions under section 715-50) was greater than nil; and

(d) that member does not satisfy the *same business test for:

(i) the period (the same business test period ) consisting of the *head company's *trial year; and

(ii) the time (the test time ) just before the *changeover time.

Note: Paragraph (1)(c) has the effect that if both this section and section 715-50 apply to the same member of the joined group, section 715-50 is applied before this section.

(2) If at the joining time that *member holds:

(a) 2 or *more assets constituted by accounting liabilities of the joining entity; or

(b) at least one asset constituted by an accounting liability of the joining entity, and at least one asset constituted by an accounting liability of another member of the group;

this section applies to each such asset in whichever order that member determines.

Amount of reduction

(3) The comparison amount is reduced to the asset's *market value at the joining time.

(4) However, if that member's *final RUNL (as reduced by any previous reductions under section 715-50 or this section) is less than the difference between:

(a) the *reduced cost base referred to in paragraph (1)(a); and

(b) the asset's *market value at the joining time;

the comparison amount is instead reduced by that final RUNL.

(5) That *final RUNL is reduced by the amount of the reduction under subsection (3) or (4).

165-CC tagged assets that form loss denial pools of head company when consolidated group is formed

715-60 Assets that the head company already owns

(1) At the time (the formation time ) when a *consolidated group comes into existence under paragraph 703-5(1)(a), a loss denial pool of the *head company is created if:

(a) the formation time is not a *changeover time for the head company; and

(b) at the formation time, the head company owns a *CGT asset:

(i) that is a *165-CC tagged asset of the head company at that time; and

(ii) that it owned at the *changeover time; and

(iii) that is not a *membership interest in a *member of the group; and

(iv) that is not a right or option (including a contingent right or option), created or issued by a member of the group, to acquire such a membership interest; and

(v) that is not constituted by a liability owed to the head company by a member of the group;

or 2 or more such assets; and

(c) the head company's *final RUNL just before the formation time (as reduced by any reductions under section 715-50 or 715-55) was greater than nil; and

(d) the head company does not satisfy the *same business test for:

(i) the period (the same business test period ) consisting of the head company's *trial year; and

(ii) the time (the test time ) just before the *changeover time.

Note: Paragraph (1)(c) has the effect that if the head company has 165-CC tagged assets that are affected by section 715-50 or 715-55 (because they are membership interests in, or accounting liabilities owed by, another group member), those sections are applied before this section.

(2) When it is created, the pool consists of the one or more *CGT assets referred to in paragraph (1)(b), and its loss denial balance is equal to the *final RUNL referred to in paragraph (1)(c).

Note 1: The pool is distinct from any other loss denial pool of the head company, for example, one created at the formation time under section 715-70.

Note 2: 170-D deferred losses on 165-CC tagged assets of the head company may be added to the pool by subsection 715-355(1).

[The next section is section 715-70.]

715-70 Assets of subsidiary member that become those of head company

(1) At the time (the formation time ) when an entity becomes a *subsidiary member of a *consolidated group, a loss denial pool of the *head company of the group is created if:

(a) the formation time is not a *changeover time for the head company; and

(b) the entity is a chosen transitional entity under Division 701 of the Income Tax (Transitional Provisions) Act 1997; and

(c) subsection (2) or (4) of this section is satisfied.

Note 1: If the entity is a chosen transitional entity, section 701-15 of the Income Tax (Transitional Provisions) Act 1997 prevents:

· section 701-10 (cost to head company of assets that entity brings into group); and

· subsection 701-35(4) (setting value of trading stock at tax-neutral amount);

of this Act from applying to the entity's assets in relation to the formation time.

Note 2: The pool is distinct from any other loss denial pool of the head company, for example, one created under this section because another entity becomes a subsidiary member of the group at the formation time.

Joining entity has 165-CC tagged assets

(2) This subsection is satisfied if:

(a) a *CGT asset of the entity, or each of 2 or more CGT assets of the entity:

(i) is a *165-CC tagged asset of the entity at the formation time; and

(ii) was owned by the entity at the *changeover time; and

(iii) is not a *membership interest in a *member of the group; and

(iv) is not a right or option (including a contingent right or option), created or issued by a member of the group, to acquire such a membership interest; and

(v) is not constituted by a liability owed to the entity by a member of the group at the formation time; and

(b) the entity's *final RUNL just before the formation time (as reduced by any reductions under section 715-50 or 715-55) was greater than nil; and

(c) the entity does not satisfy the *same business test for:

(i) the period (the same business test period ) consisting of the entity's *trial year; and

(ii) the time (the test time ) just before the *changeover time.

Note: Paragraph (2)(b) has the effect that if the entity has 165-CC tagged assets that are affected by section 715-50 or 715-55 (because they are membership interests in, or accounting liabilities owed by, another group member), those sections are applied before this section.

(3) When it is created because of subsection (2), the pool consists of the one or more *CGT assets referred to in paragraph (2)(a), and its loss denial balance is equal to the *final RUNL referred to in paragraph (2)(b).

Note: 170-D deferred losses on 165-CC tagged assets of the head company may be added to the pool by subsection 715-355(2).

Entity has loss denial pool

(4) This subsection is satisfied if, just before the formation time, the entity had a *loss denial pool.

(5) When it is created because of subsection (4), the *head company's loss denial pool:

(a) consists of the one or more *CGT assets of which the entity's loss *denial pool consisted; and

(b) has a loss denial balance equal to the *loss denial balance of the entity's loss denial pool;

just before the formation time.

How Subdivision 165-CC applies to consolidated groups

715-75 Extension of single entity rule and entry history rule

(1) Subsection 701-1(1) (Single entity rule) and section 701-5 (Entry history rule) also have effect for all the purposes of Subdivision 165-CC (about change of ownership or control of a company that has an unrealised net loss).

Note: One consequence of this is that the head company is the only member of a consolidated group that can have a changeover time and be subject to consequences under Subdivision 165-CC. The head company is treated as owning all CGT assets owned by group members, and as making relevant losses.

(2) This section is not intended to limit the effect that subsection 701-1(1) and section 701-5 have apart from this section.

Effect on Subdivision 165-CC of entity leaving consolidated group

715-80 Application of sections 715-85 to 715-110

Sections 715-85 to 715-110 apply if, at a particular time (the leaving time ), an entity (the leaving entity ) ceases to be a *subsidiary member of a *consolidated group.

Note 1: If a changeover time happened to the head company at or after the group came into existence and before the leaving time, Subdivision 165-CC does not apply to the head company at and after the leaving time, in respect of assets that leave with the leaving entity, in relation to the changeover time.

This is because the head company can no longer make a capital loss, or become entitled to a deduction, in respect of a CGT event happening to any of those assets.

Note 2: If, just before the leaving time, the head company had a loss denial pool, see section 715-120.

715-85 First changeover time for leaving company at or after leaving time

If the leaving entity is a company, its first *changeover time at or after the leaving time is determined:

(a) on the basis that the reference time under subsection 165-115A(2A) is the one that would be used in determining whether the leaving time was a changeover time for the head company; and

(b) making the additional assumptions in section 715-290.

Note: If the leaving entity is a trust, it cannot have a changeover time (because Subdivision 165-CC applies only to companies), so section 715-95 applies to it instead: see subsection 715-95(2).

715-90 How same business test applies if leaving time is changeover time for leaving company

(1) This section applies if:

(a) the leaving entity is a company; and

(b) the leaving time is a *changeover time for the leaving entity.

(2) The continuity period referred to in subsection 165-115B(3), as applying to the leaving time as a *changeover time for the leaving entity, is taken to have ended just after that time.

Note: This ensures that the same business test is applied to the business that the leaving entity carries on at the leaving time: see subsection 165-13(3).

715-95 If ownership and control of leaving entity have not changed since head company's last changeover time

(1) This section applies if:

(a) the leaving entity is a company; and

(b) the leaving time is not a *changeover time for the leaving entity; and

(c) just before the leaving time, the *head company owned at least one *CGT asset:

(i) that was a *165-CC tagged asset just before the leaving time; and

(ii) that it owned at the latest changeover time for the head company at or after the group came into existence and before the leaving time; and

(d) at least one asset covered by paragraph (c) is an asset (a leaving asset ) that becomes an asset of the leaving entity at the leaving time because subsection 701-1(1) (Single entity rule) ceases to apply to the entity; and

(e) the head company's *final RUNL at the leaving time is greater than nil.

(2) This section also applies if the leaving entity is a trust.

(3) If the *head company does not satisfy the *same business test for:

(a) the period (the same business test period ) starting at the earlier of:

(i) the time 12 months before the leaving time; and

(ii) when the head company came into existence;

and ending just before the leaving time; and

(b) the time (the test time ) just before the *changeover time;

the head company must make one of the choices for which sections 715-100, 715-105 and 715-110 provide.

For provisions about making one of these choices,
see sections 715-175 to 715-185.

715-100 First choice: adjustable values of leaving assets reduced to nil

The first choice is to reduce the *adjustable value of each leaving asset to nil. The choice has effect accordingly, just before the leaving time. The *head company's *final RUNL is not reduced because of it.

Note: The consequences of the choice are worked out under section 715-145.

715-105 Second choice: head company's final RUNL applied in reducing adjustable values of leaving assets that are loss assets

(1) The second choice is to reduce under this section the *adjustable value of each leaving asset (a loss asset ) for which the *head company would have had a notional capital loss, or notional revenue loss, under section 165-115F at the time (the test time ) just before the leaving time if the test time had been a *changeover time for the head company. The choice has effect accordingly.

Note: The consequences of the choice are worked out under this section and section 715-145.

(2) If:

(a) 2 or more entities cease to be *subsidiary members of the *consolidated group at the leaving time; and

(b) 2 or more of them make the second choice;

the choices have effect in whichever order the *head company determines.

(3) This section applies to each of the loss assets in order, according to their respective *adjustable values (apart from this section) at the test time: from largest to smallest. (If an asset has more than one such adjustable value, use the greater or greatest of them.)

(4) At the test time, the *adjustable value of the loss asset is reduced to the asset's *market value at that time.

(5) However, if the *head company's *final RUNL at the leaving time (as reduced by any previous reductions under this section) is less than the difference between:

(a) the *adjustable value of the loss asset (apart from this section) at the test time; and

(b) the asset's *market value at the test time;

the adjustable value is instead reduced at the test time by that final RUNL.

(6) That *final RUNL is reduced by the amount of the reduction under subsection (4) or (5). If 2 or more such reductions are made for the same asset (because it has 2 or more different characters), that final RUNL is reduced by the greater or greatest of the reductions.

715-110 Third choice: loss denial pool of leaving entity created

(1) The third choice can be made only if every asset covered by paragraph 715-95(1)(c) is a leaving asset. The choice is to have a loss denial pool of the leaving entity created at the leaving time, consisting of every leaving asset. (To avoid doubt, the choice can be made even if the leaving entity is not a company.)

(2) A choice under this section has effect accordingly. The pool is distinct from any other loss denial pool of the leaving entity.

(3) When the pool is created, its loss denial balance is equal to the *head company's *final RUNL at the leaving time.

Note: If the head company makes this choice, the leaving entity can choose to cancel the loss denial pool by reducing reduced cost bases of assets in the pool: see section 715-185.

[The next section is section 715-120.]

Effect of assets in loss denial pool of head company becoming assets of leaving entity

715-120 What happens

(1) This section applies if:

(a) at a particular time (the leaving time ), an entity (the leaving entity ) ceases to be a *subsidiary member of a *consolidated group; and

(b) just before the leaving time, the *head company had a *loss denial pool; and

(c) at the leaving time, at least one *CGT asset (a leaving asset ) that was in the pool just before that time becomes a CGT asset of the leaving entity because subsection 701-1(1) (Single entity rule) ceases to apply to the entity;

(2) Each leaving asset leaves the *loss denial pool at the leaving time.

(3) If:

(a) the leaving entity is a company and the leaving time is not a *changeover time for the leaving entity; or

(b) the leaving entity is a trust;

the *head company must make one of the choices for which sections 715-125, 715-130 and 715-135 provide.

For provisions about making one of these choices,
see sections 715-175 to 715-185.

715-125 First choice: adjustable values of leaving assets reduced to nil

The first choice is to reduce the *adjustable value of each leaving asset to nil. The choice has effect accordingly, just before the leaving time. The *loss denial balance of the *head company's *loss denial pool is not reduced because of it.

Note: The consequences of the choice are worked out under section 715-145.

715-130 Second choice: pool's loss denial balance applied in reducing adjustable values of leaving assets that are loss assets

(1) The second choice is to reduce under this section the *adjustable value of each leaving asset (a loss asset ) for which the *head company would have had a notional capital loss, or notional revenue loss, under section 165-115F at the time (the test time ) just before the leaving time if the test time had been a *changeover time for the head company. The choice has effect accordingly.

Note: The consequences of the choice are worked out under this section and section 715-145.

(2) If:

(a) 2 or more entities cease to be *subsidiary members of the *consolidated group; and

(b) 2 or more of them make the second choice;

the choices have effect in the same order as the entities cease being subsidiary members. If 2 or more of the entities ceased at the same time, their choices have effect in whichever order the *head company determines.

(3) This section applies to each of the loss assets in order, according to their respective *adjustable values (apart from this section) at the test time: from largest to smallest. (If an asset has more than one such adjustable value, use the greater or greatest of them.)

(4) At the test time, the *adjustable value of the loss asset is reduced to the asset's *market value at that time.

(5) However, if the *loss denial balance (as reduced by any previous reductions under this section or section 715-160) of the *head company's *loss denial pool is less than the difference between:

(a) the *adjustable value of the loss asset (apart from this section) at the test time; and

(b) the asset's *market value at the test time;

the adjustable value is instead reduced at the test time by that loss denial balance.

(6) That *loss denial balance is reduced at the leaving time by the amount of the reduction under subsection (3) or (4). If 2 or more such reductions are made for the same asset (because it has 2 or more different characters), that loss denial balance is reduced by the greater or greatest of the reductions.

715-135 Third choice: loss denial pool of leaving entity created

(1) The third choice can be made only if every asset that was in the *loss denial pool just before the leaving time is a leaving asset. The choice is to have a loss denial pool of the leaving entity created at the leaving time, consisting of every leaving asset. (To avoid doubt, the choice can be made even if the leaving entity is not a company.)

(2) A choice under this section has effect accordingly. The pool is distinct from any other loss denial pool of the leaving entity.

(3) When the leaving entity's loss denial pool is created, its loss denial balance equals the loss denial balance of the head company's loss denial pool (as reduced by any previous reductions under section 715-130 or 715-160).

Note: If the head company makes this choice, the leaving entity can choose to cancel the loss denial pool by reducing reduced cost bases of assets in the pool: see section 715-185.

(4) The head company's *loss denial pool ceases to exist when the leaving entity's loss denial pool is created.

[The next section is section 715-145.]

Effect of first and second choices on various kinds of assets

715-145 Effect of choice on adjustable value of leaving asset

(1) This section has effect for the purposes of determining the consequences of a choice under any of sections 715-100, 715-105, 715-125, 715-130 and 715-185 (the choice provisions ) for a leaving asset.

(2) The asset's adjustable value at the time (the test time ) just before the leaving time is worked out under this table. (If the asset is covered by 2 or more items, there are consequences for it under the choice provisions and this section in respect of each of the items.)

Adjustable value at the test time

Item

If:

Its adjustable value is:

1

the asset is a *CGT asset

its *reduced cost base

2

the asset is an item of *trading stock of the *head company at the test time, and became part of the *head company's *trading stock in the income year (the test year ) in which the test time occurs

its *cost

3

the asset is an item of *trading stock of the *head company at the test time, item 2 does not apply, and at the end of the last income year before the test year, the item was *valued at its *cost

its *cost

4

the asset is an item of *trading stock of the *head company at the test time and neither of items 2 and 3 applies

its *value as trading stock of the head company on hand at the start of the income year in which the test time occurs

5

the asset is a *depreciating asset

worked out under section 40-85

6

the asset is a *revenue asset

the total of the amounts that would be subtracted from the gross disposal proceeds in calculating any profit or loss on disposal of the asset by the head company

(3) If any of the choice provisions reduces at the test time the asset's *adjustable value, the thing identified for the asset under the table in subsection (2) of this section is reduced by the same amount.

(4) Subsection (3) has effect for the purposes of working out under section 711-30 the *head company's *terminating value for the asset at the leaving time.

[The next section is section 715-155.]

General provisions about loss denial pools

715-155 When asset leaves pool

A *CGT asset leaves a *loss denial pool:

(a) just after a *realisation event happens to the asset, unless the realisation event is the ending of an income year (in the case of an item of *trading stock); or

(b) as mentioned in subsection 715-120(2) (when it becomes an asset of the leaving entity).

715-160 How loss denial balance is applied to losses realised on assets in pool

(1) If, apart from this section, a loss would be *realised for income tax purposes by a *realisation event that happens to a *CGT asset when it is in a *loss denial pool of an entity, the loss is reduced by the lesser of:

(a) the amount of the loss; and

(b) the pool's *loss denial balance (as reduced by any previous reductions under section 715-130 or this subsection);

and the loss denial balance is reduced by the same amount.

(2) Subsection (1) applies to *realisation events in the order in which they happen. If 2 or more happen at the same time, it applies to them in whichever order the entity determines.

(3) Subsection (1) reduces a *loss denial balance after section 715-130 does, unless the *realisation event happens before the leaving time referred to in that section.

715-165 When pool ceases to exist

(1) A *loss denial pool of a company ceases to exist when there is a *changeover time for the company.

Note: The CGT assets in the pool then become subject to the application of Subdivision 165-CC (about change of ownership or control of a company that has an unrealised net loss).

(2) A *loss denial pool of any entity ceases to exist:

(a) when there are no *CGT assets, and no *170-D deferred losses, in the pool; or

(b) just after the *loss denial balance becomes nil; or

(c) when the entity becomes a *subsidiary member of a *consolidated group; or

(d) as mentioned in subsection 715-135(4).

[The next section is section 715-175.]

Choices under this Subdivision

715-175 When choice must be made

(1) A choice under section 715-95 or 715-120 must be made within 6 months after the leaving time, or within a further period allowed by the Commissioner.

(2) After that 6 months, or that further period, the head company is taken to have made the first choice under section 715-100 or 715-125 unless it is established that the head company made a different choice within that 6 months or further period.

715-180 Head company to notify leaving entity of choice

(1) Within one month after making a choice under section 715-95 or 715-120, or within a further period allowed by the Commissioner, the head company must give the leaving entity written notice of the choice.

(2) If the choice is to have a *loss denial pool of the leaving entity created at the leaving time, the notice must also specify the pool's *loss denial balance at that time.

715-185 Leaving entity may choose to cancel loss denial pool by reducing adjustable values of assets in the pool

(1) Within 6 months after a *loss denial pool is created under section 715-110 or 715-135, or within a further period allowed by the Commissioner, the leaving entity may choose to be treated as if the *head company had instead made:

(a) the first choice under section 715-100 or 715-125; or

(b) the second choice under section 715-105 or 715-130;

as specified by the leaving entity in its choice.

(2) If the leaving entity makes a choice under subsection (1):

(a) the *loss denial pool ceases to exist just after the leaving time; and

(b) at the leaving time, the *adjustable value of each *CGT asset in the pool is reduced to what it would have been at that time if the head company had instead made the choice specified by the leaving entity in its choice.

(3) The choice by the leaving entity does not affect how subsection 715-135(4) applies to the *head company.

Note: This means that the head company's loss denial pool still ceases to exist.

Subdivision 715-B - How Subdivision 165-CD applies to consolidated groups and leaving entities

Table of sections

How Subdivision 165-CD applies to consolidated groups

715-215 Extension of single entity rule and entry history rule

715-225 Working out adjusted unrealised loss using individual asset method

715-230 No reductions or other consequences for interests subject to loss cancellation under Subdivision 715-H

How Subdivision 165-CD applies to leaving entity that is a company

715-240 Application of sections 715-245 to 715-260

715-245 If ownership or control of leaving entity has altered since head company's last alteration time or formation of group

715-250 If head company has had an alteration time but ownership and control of leaving entity have not altered since

715-255 Consequences if leaving entity is a loss company at the leaving time

715-260 If neither of sections 715-245 and 715-250 applies

How Subdivision 165-CD applies to leaving entity that is a trust

715-270 Subdivision 165-CD applies

How Subdivision 165-CD applies to consolidated groups

715-215 Extension of single entity rule and entry history rule

(1) Subsection 701-1(1) (Single entity rule) and section 701-5 (Entry history rule) also have effect for all the purposes of Subdivision 165-CD (about reductions after alterations in ownership or control of loss company).

Note: One consequence of this is that the head company is the only member of a consolidated group that can have an alteration time and be subject to reductions or other consequences under Subdivision 165-CD. The head company is treated as owning all CGT assets owned by group members, and as making relevant losses.

Another consequence is for working out who has a relevant equity interest or relevant debt interest in a company that has an alteration time at which it is a loss company but not a member of a consolidated group. Interests in the loss company that are owned by subsidiary members of the group are treated as being owned by the head company.

(2) This section is not intended to limit the effect that subsection 701-1(1) and section 701-5 have apart from this section.

[The next section is section 715-225.]

715-225 Working out adjusted unrealised loss using individual asset method

(1) For the purposes of:

(a) using the *individual asset method to work out whether the *head company of a *consolidated group has an adjusted unrealised loss under section 165-115U at an *alteration time; or

(b) working out under section 165-115W whether the head company of a consolidated group has a trading stock decrease at an alteration time;

step 1 of the method statement in subsection 165-115U(1), or step 2 of the method statement in subsection 165-115W(1), does not apply to an amount that was counted in respect of a *CGT asset at an earlier time if:

(c) at the time (the joining time ) when an entity became a *subsidiary member of the group, the asset became an asset of the head company because of subsection 701-1(1) (Single entity rule); and

(d) the earlier time is an *alteration time that happened in respect of the entity before the joining time;

unless the entity is a chosen transitional entity under Division 701 of the Income Tax (Transitional Provisions) Act 1997.

Note: If the joining entity is a chosen transitional entity, section 701-15 of the Income Tax (Transitional Provisions) Act 1997 prevents:

· section 701-10 (cost to head company of assets that entity brings into group); and

· subsection 701-35(4) (setting value of trading stock at tax-neutral amount);

of this Act from applying to the assets of the joining entity in relation to the joining time.

If the joining entity is not a chosen transitional entity, it is assumed that the process of resetting the tax costs of its assets will bring their tax costs into closer alignment to their market values, and so remove the need to consider unrealised losses on those assets that existed before the joining time.

(2) This section has effect despite section 701-5 (Entry history rule).

715-230 No reductions or other consequences for interests subject to loss cancellation under Subdivision 715-H

If section 715-610 reduces a loss that would otherwise be *realised for income tax purposes by a *realisation event that happens to an interest in, or a debt owed by, a company, sections 165-115ZA and 165-115ZB do not apply (and are taken never to have applied) to the interest or debt, in relation to an *alteration time that happened for the company during the ownership period referred to in subsection 715-610(2).

Note 1: Section 715-610 is about cancelling a loss on a realisation event for a direct or indirect interest in a subsidiary member of a consolidated group.

Note 2: Sections 165-115ZA and 165-115ZB are about the consequences that an alteration time for a loss company has for relevant equity interests and relevant debt interests in the company.

[The next section is section 715-240.]

How Subdivision 165-CD applies to leaving entity that is a company

715-240 Application of sections 715-245 to 715-260

Sections 715-245 to 715-260 affect how Subdivision 165-CD (about reductions after alterations in ownership or control of loss company) applies to a company (the leaving entity ) at and after the time (the leaving time ) when it ceases to be a *subsidiary member of a *consolidated group that came into existence at a particular time (the formation time ).

Note: If a trust ceases to be a subsidiary member of a consolidated group: see section 715-270.

715-245 If ownership or control of leaving entity has altered since head company's last alteration time or formation of group

(1) This section applies if the leaving time would be an *alteration time for the leaving entity if:

(a) the reference time under subsection 165-115L(2) or 165-115M(2) were:

(i) if at least one alteration time has occurred in relation to the *head company of the *consolidated group since the formation time and before the leaving time - the time just after the most recent such alteration time; or

(ii) otherwise - the formation time; and

(b) the additional assumptions in section 715-290 were made.

(2) The leaving time is an alteration time for the leaving entity.

Note: One consequence of this is that the reference time for working out the leaving entity's next alteration time is the time just after the leaving time.

(3) The leaving entity is a loss company at that *alteration time if, and only if, it has an *adjusted unrealised loss at that time. If so, that adjusted unrealised loss is the leaving entity's overall loss at that time.

Note 1: Subsection (4) affects how the leaving entity works out its adjusted unrealised loss at the leaving time in some cases.

Note 2: If the leaving entity is a loss company at the leaving time, section 715-255 provides for the consequences.

(4) If the leaving entity uses the *individual asset method of working out its *adjusted unrealised loss at that *alteration time, then for the purposes of:

(a) step 1 of the method statement in subsection 165-115U(1); and

(b) the method statement in subsection 165-115W(1);

the leaving entity is taken to have had no earlier alteration time.

715-250 If head company has had an alteration time but ownership and control of leaving entity have not altered since

(1) This section applies if:

(a) at least one *alteration time has occurred in relation to the *head company of the *consolidated group since the formation time and before the leaving time; and

(b) the leaving time is not an *alteration time for the leaving entity under subsection 715-245(2).

(2) The leaving time is an alteration time for the leaving entity.

(3) However, for the purposes of determining when the leaving entity's next *alteration time happens, the reference time under subsection 165-115L(2) or 165-115M(2) is the time just after the most recent alteration time for the *head company before the leaving time.

(4) The leaving entity is a loss company at the leaving time if, and only if, the *head company would have had an *adjusted unrealised loss at the most recent *alteration time (the head company alteration time ) for the head company before the leaving time if that adjusted unrealised loss (if any) were worked out on the basis that:

(a) the head company chooses whether the *individual asset method or the *global method is used; and

(b) a *CGT asset is taken into account only if:

(i) the head company owned it at the head company alteration time; and

(ii) it becomes a CGT asset of the leaving entity at the leaving time because subsection 701-1(1) (the single entity rule) ceases to apply to the entity; and

(c) if the individual asset method is used, then for the purposes of:

(i) step 1 of the method statement in subsection 165-115U(1); and

(ii) the method statement in subsection 165-115W(1);

the head company had no earlier alteration time.

(5) If the leaving entity is a *loss company at the leaving time, its overall loss at that time is the *adjusted unrealised loss worked out under subsection (4).

715-255 Consequences if leaving entity is a loss company at the leaving time

(1) If:

(a) section 715-245 or 715-250 applies; and

(b) the leaving entity is a *loss company at the leaving time;

the head company must choose whether subsection (2) or (3) of this section has effect for the purposes of applying, to each *membership interest in the leaving entity, in relation to the time just before the leaving time, whichever of these provisions is appropriate:

(c) subsection 701-55(3) (about trading stock);

(d) subsection 701-55(5), but only so far as it relates to working out the *reduced cost base of a *membership interest that was *acquired on or after 20 September 1985;

(e) subsection 701-55(6) (about revenue assets).

Note: Section 701-55 is about setting the tax cost of an asset.

(2) If the *head company chooses this subsection, the interest's *tax cost setting amount (apart from this section) just before the leaving time is reduced to nil.

(3) If the *head company chooses this subsection, the interest's *tax cost setting amount (apart from this section) just before the leaving time is reduced by the adjustment amount under section 165-115ZB, which is calculated on the basis that:

(a) just before the leaving time, all the *membership interests in the leaving entity constituted a single relevant equity interest under section 165-115X that the head company had in the leaving entity; and

(b) the adjustment amount is worked out and applied in accordance with subsection 165-115ZB(6), but disregarding the paragraphs of that subsection except paragraphs 165-115ZB(6)(a) and (d).

(4) The *head company's choice must be made within 6 months after the leaving time, or within a further period allowed by the Commissioner.

(5) After that 6 months, or that further period, the head company is taken to have chosen subsection (2) unless it is established that the head company made a different choice within that 6 months or further period.

Rights and options to acquire membership interests

(6) Subsection 711-15(2) (which treats rights and options as membership interests) also applies for the purposes of this section, on the basis that the *consolidated group referred to in section 715-240 is the old group referred to in that subsection.

715-260 If neither of sections 715-245 and 715-250 applies

(1) This section applies if:

(a) no *alteration time has occurred in relation to the *head company of the *consolidated group since the formation time and before the leaving time; and

(b) the leaving time is not an *alteration time for the leaving entity under subsection 715-245(2).

(2) The leaving entity's first *alteration time after the leaving time is determined:

(a) on the basis that the reference time under subsection 165-115L(2) or 165-115M(2) is the time just after the formation time; and

(b) making the additional assumptions in section 715-290.

(3) If the leaving entity uses the *individual asset method of working out its *adjusted unrealised loss at that first *alteration time, then for the purposes of:

(a) step 1 of the method statement in subsection 165-115U(1); and

(b) the method statement in subsection 165-115W(1);

the leaving entity is taken to have had no earlier alteration time.

[The next section is section 715-270.]

How Subdivision 165-CD applies to leaving entity that is a trust

715-270 Subdivision 165-CD applies

(1) At and after the time (the leaving time ) when a trust ceases to be a *subsidiary member of a *consolidated group, Subdivision 165-CD (about reductions after alterations in ownership or control of loss company) applies to the trust on the basis set out in this section.

(2) The trust is taken to be a company.

(3) The leaving time is the only alteration time in respect of the trust.

(4) The trust is a loss company at that time if, and only if, it has an *adjusted unrealised loss at that time. If so, that adjusted unrealised loss is its overall loss at that time.

(5) If the trust is a *loss company at the leaving time, the *head company must choose whether subsection (6) or (7) of this section has effect for the purposes of applying, to each *membership interest in the trust, in relation to the time just before the leaving time, whichever of these provisions is appropriate:

(c) subsection 701-55(3) (about trading stock);

(d) subsection 701-55(5), but only so far as it relates to working out the *reduced cost base of a *membership interest that was *acquired on or after 20 September 1985;

(e) subsection 701-55(6) (about revenue assets).

Note: Section 701-55 is about setting the tax cost of an asset.

(6) If the *head company chooses this subsection, the interest's *tax cost setting amount (apart from this section) just before the leaving time is reduced to nil.

(7) If the *head company chooses this subsection, the interest's *tax cost setting amount (apart from this section) just before the leaving time is reduced by the adjustment amount under section 165-115ZB, which is calculated on the basis that:

(a) just before the leaving time:

(i) all the *membership interests in the leaving entity constituted a single relevant equity interest under section 165-115X that the *head company had in the leaving entity; and

(ii) each of those interests was an equity under section 165-115X that the *head company had in the leaving entity; and

(b) the adjustment amount is worked out and applied in accordance with subsection 165-115ZB(6), but disregarding the paragraphs of that subsection except paragraphs 165-115ZB(6)(a) and (d).

(8) The *head company's choice must be made within 6 months after the leaving time, or within a further period allowed by the Commissioner.

(9) After that 6 months, or that further period, the head company is taken to have chosen subsection (6) unless it is established that the head company made a different choice within that 6 months or further period.

Rights and options to acquire membership interests

(10) Subsection 711-15(2) (which treats rights and options as membership interests) also applies for the purposes of this section, on the basis that the *consolidated group is the old group referred to in that subsection.

Subdivision 715-C - Common rules for the purposes of Subdivisions 715-A and 715-B

715-290 Additional assumptions to be made when using reference time

The additional assumptions to be made are that, throughout the period starting at the reference time and ending just before the leaving time:

(a) the leaving entity was in existence; and

(b) the *head company held and beneficially owned all the *membership interests in the leaving entity (instead of whoever actually did); and

(c) those membership interests remained the same; and

(d) the head company directly controlled the voting power in the leaving entity.

Subdivision 715-D - Treatment of company's deferred losses under Subdivision 170-D on joining a consolidated group

Table of sections

Key terminology

715-310 What is a 170-D deferred loss , and when it revives

Deferred loss on 165-CC tagged asset

715-355 Head company's own deferred losses at formation time

715-360 Deferred losses brought in by subsidiary member

715-365 How loss denial balance is applied when 170-D deferred loss revives

Key terminology

715-310 What is a 170-D deferred loss , and when it revives

(1) A *capital loss, deduction, or partner's share of a deduction, that section 170-270 (about transactions within linked groups) requires to be disregarded is a 170-D deferred loss made:

(a) by the company that paragraph 170-255(1)(a) refers to as the originating company; and

(b) at the time of the event that paragraph refers to as the deferral event; and

(c) on the *CGT asset *acquired by the other entity referred to in that paragraph.

(2) The *170-D deferred loss revives at the time when section 170-275 (as applying in relation to the deferral event) treats the originating company as having made a *capital loss, or having become entitled to a deduction, in respect of that asset.

[The next section is section 715-355.]

Deferred loss on 165-CC tagged asset

715-355 Head company's own deferred losses at formation time

(1) This section applies if, at the time (the formation time ) when a *consolidated group comes into existence, the *head company has (otherwise than because of section 701-5 (Entry history rule)) a *170-D deferred loss that:

(a) it made on a *CGT asset that is a *165-CC tagged asset of the head company because of paragraph 165-115A(1A)(b) (which covers CGT assets on which it has 170-D deferred losses); and

(b) has not *revived.

(2) If a *loss denial pool of the *head company is created under section 715-60 at the formation time, each *170-D deferred loss of that kind that the head company has at that time is added to the loss denial pool at that time.

(3) Otherwise, a loss denial pool of the *head company is created at the formation time if:

(a) the formation time is not a *changeover time for the head company; and

(b) the head company's *final RUNL just before the formation time (as reduced by any reductions under section 715-50 or 715-55) was greater than nil; and

(c) the head company does not satisfy the *same business test for:

(i) the period (the same business test period ) consisting of the head company's *trial year; and

(ii) the time (the test time ) just before the *changeover time.

Note: Paragraph (3)(b) has the effect that if the head company has 165-CC tagged assets that are affected by section 715-50 or 715-55 (because they are membership interests in, or accounting liabilities owed by, another group member), those sections are applied before this section.

(4) When it is created because of subsection (3), the pool consists of each *170-D deferred loss covered by subsection (2), and its loss denial balance is equal to the *final RUNL referred to in paragraph (3)(b).

Note: The pool is distinct from any other loss denial pool of the head company, for example, one created at the formation time under section 715-360.

715-360 Deferred losses brought in by subsidiary member

(1) This section applies if, just before the time (the membership time ) when a company (the deferred loss company ) becomes a *subsidiary member of a *consolidated group, it had a *170-D deferred loss that:

(a) it made on a *CGT asset that is a *165-CC tagged asset of the company at the membership time because of paragraph 165-115A(1A)(b) (which covers CGT assets on which it has 170-D deferred losses); and

(b) as at the membership time has not *revived.

(2) If a *loss denial pool of the *head company is created under subsection 715-70(2) because of the deferred loss company becoming a *subsidiary member of the group, each *170-D deferred loss of that kind that the deferred loss company had just before the membership time is added to the loss denial pool at that time.

(3) Otherwise, a loss denial pool of the *head company is created at the membership time if:

(a) the membership time is not a *changeover time for the head company; and

(b) the deferred loss company's *final RUNL just before the membership time (as reduced by any reductions under section 715-50 or 715-55) was greater than nil; and

(c) the deferred loss company does not satisfy the *same business test for:

(i) the period (the same business test period ) consisting of the deferred loss company's *trial year; and

(ii) the time (the test time ) just before the *changeover time.

Note 1: The 170-D deferred losses become those of the head company at the formation time because of section 701-5 (Entry history rule).

Note 2: Paragraph (3)(b) has the effect that if the deferred loss company has other 165-CC tagged assets affected by section 715-50 or 715-55 (because the membership time is when the group comes into existence, and the other 165-CC tagged assets are membership interests in, or accounting liabilities owed by, another group member), those sections are applied before this section.

(4) When it is created because of subsection (3), the pool consists of each 170-D deferred loss covered by subsection (2), and its loss denial balance is equal to the *final RUNL referred to in paragraph (3)(b).

Note: The pool is distinct from any other loss denial pool of the head company, for example, one created under this section because another entity becomes a subsidiary member of the group at the membership time.

715-365 How loss denial balance is applied when 170-D deferred loss revives

(1) If a *170-D deferred loss on a *CGT asset is in a *loss denial pool of an entity when the loss *revives, the *capital loss or deduction that section 170-275 would, apart from this section, treat the entity as having made or become entitled to at that time in respect of the asset is reduced by the lesser of:

(a) the amount of the capital loss or deduction; and

(b) the pool's *loss denial balance (as reduced by any previous reductions under section 715-130, subsection 715-160(1) or this subsection);

and the loss denial balance is reduced by the same amount.

(2) Subsection (1) applies to *170-D deferred losses in the order in which they *revive. If 2 or more revive at the same time, it applies to them in whichever order the entity determines.

(3) Subsection (1) reduces a *loss denial balance before section 715-130 does, unless the *realisation event happens after the leaving time referred to in that section.

[The next Subdivision is Subdivision 715-G.]

Subdivision 715-G - How value shifting rules apply to a consolidated group

Table of sections

715-410 Extension of single entity rule and entry history rule

715-450 No reductions or other consequences for interests subject to loss cancellation under Subdivision 715-H

715-410 Extension of single entity rule and entry history rule

(1) Subsection 701-1(1) (Single entity rule) and section 701-5 (Entry history rule) also have effect for all the purposes of Part 3-95 (Value shifting).

Note: One consequence of this for the operation of Division 727 (about indirect value shifting affecting interests in companies and trusts, and arising from non-arm's length dealings) is that economic benefits provided by or to a subsidiary member of a consolidated group are treated as provided by or to the head company of the group. As a result:

· the head company is the only group member that can be a losing entity or gaining entity for an indirect value shift; and

· economic benefits provided by one group member to another are treated as provided by the head company to itself, and so have no relevance to Division 727.

Another consequence is that the head company is treated as owning all interests owned by group members in a losing entity or gaining entity that is not a group member.

(2) This section is not intended to limit the effect that subsection 701-1(1) and section 701-5 have apart from this section.

[The next section is section 715-450.]

715-450 No reductions or other consequences for interests subject to loss cancellation under Subdivision 715-H

If section 715-610 reduces a loss that would otherwise be *realised for income tax purposes by a *realisation event that happens to an *equity or loan interest in an entity:

(a) the loss is not subject to reduction under Division 723 (Direct value shifting by creating right over non-depreciating asset) or 727 (Indirect value shifting); and

(b) the interest's *adjustable value is not, and is taken never to have been, reduced under Division 725 because of a *direct value shift during the ownership period referred to in subsection 715-610(2); and

(c) the interest's *adjustable value is not, and is taken never to have been, reduced under Division 727 because of an *indirect value shift during that period.

Note: Section 715-610 is about cancelling a loss on a realisation event for a direct or indirect interest in a subsidiary member of a consolidated group.

Subdivision 715-H - Cancelling loss on realisation event for direct or indirect interest in a subsidiary member of a consolidated group

Table of sections

715-610 Cancellation of loss

715-615 Exception for interests in entity leaving consolidated group

715-620 Exception if loss attributable to certain matters

715-610 Cancellation of loss

(1) This section reduces to nil a loss that would otherwise be *realised for income tax purposes by a *realisation event that happens to an *equity or loan interest (the realised interest ) in an entity (the first entity ) when it is owned by another entity (the owner ), if the conditions in subsections (2) and (4) are met.

(2) The first condition is that, at some time during the period (the ownership period ) when the owner owned the realised interest:

(a) the first entity was a *subsidiary member of a *consolidated group, and the owner was not a *member of the group; or

(b) the realised interest was an *external indirect equity or loan interest in a subsidiary member of a consolidated group; or

(c) the realised interest was an *equity or loan interest in an entity that, at that time:

(i) owned an equity or loan interest in a subsidiary member of a consolidated group; and

(ii) was not a member of the group; or

(d) the realised interest was an *equity or loan interest in an entity that owned at that time an external indirect equity or loan interest in a subsidiary member of a consolidated group.

(3) An *equity or loan interest in an entity (the test entity ) is an external indirect equity or loan interest in a *subsidiary member of a *consolidated group if, and only if, neither the owner of the interest nor the test entity is a member of the group and:

(a) the test entity owns an equity or loan interest in the subsidiary member; or

(b) the test entity owns an equity or loan interest that is an external indirect equity or loan interest in the subsidiary member because of one or more other applications of this subsection.

(4) The second condition is that, at the same or a different time during the ownership period:

(a) the owner was, or *controlled (for value shifting purposes), the *head company of a *consolidated group because of which the first condition is satisfied; or

(b) the owner was an *associate of an entity that, at the same or a different time during the ownership period, was, or controlled (for value shifting purposes), the head company of such a consolidated group.

715-615 Exception for interests in entity leaving consolidated group

Membership interests in leaving entity

(1) If:

(a) the realised interest is a *membership interest; and

(b) during the ownership period the first entity ceased to be a *subsidiary member of a *consolidated group;

the first condition in section 715-610 cannot be satisfied, because of that consolidated group, at a time when the first entity was a member of the group, unless the interest needed to be disregarded under section 703-35 (about employee shares) in order for the first entity to be a member of the group at that time.

Liabilities owed by leaving entity

(2) If the realised interest:

(a) consists of a liability owed by the first entity to the owner; and

(b) became an asset of the owner because subsection 701-1(1) (the single entity rule) ceased to apply to the first entity when it ceased to be a *subsidiary member of a *consolidated group;

the first condition in section 715-610 cannot be satisfied, because of that consolidated group, at a time when the first entity was a member of the group.

715-620 Exception if loss attributable to certain matters

(1) The loss is not reduced if all of it can be shown to be attributable to things other than these:

(a) something that would be reflected in what would, apart from this Part, be an overall loss under section 165-115R or 165-115S, of a *member of a *consolidated group (an excluded group ) because of which the first condition in section 715-610 is satisfied, at an *alteration time for that member;

(b) an *indirect value shift for which, apart from this Part, a member of an excluded group would be the *losing entity or the *gaining entity.

(2) If only part of the loss can be shown to be attributable to things other than the ones listed in subsection (1), the loss is reduced to the amount of that part.