INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

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 705-35   Tax cost setting amount for reset cost base assets  

705-35(1)  


For each asset of the joining entity (a reset cost base asset ) that is not a * retained cost base asset, the asset ' s * tax cost setting amount is worked out by:


(a) first working out the joined group ' s * allocable cost amount for the joining entity in accordance with section 705-60 ; and


(b) then reducing that amount by the total of the * tax cost setting amounts for each retained cost base asset (but not below zero); and


(c) finally, allocating the result to each of the joining entity ' s reset cost base assets in proportion to their * market values.

Note 1:

For an asset consisting of an entitlement to receive an amount that will be included in assessable income, the market value of the asset would take into account the tax payable on the amount.

Note 1A:

If a set of linked assets and liabilities includes one or more reset cost base assets, section 705-59 may affect how this section applies. In particular, that section may exclude the application of paragraph 705-35(1)(b) to retained cost base assets in the set; this in turn may affect the application of CGT event L3.

Note 2:

If there are no reset cost base assets, the result is instead treated as a capital loss of the head company: see CGT event L4.

705-35(2)  
(Repealed by No 99 of 2012)

Goodwill resulting from ownership and control of the joining entity

705-35(3)  
If, just after the joining time, the * head company has, because of its ownership and control of the joining entity, a goodwill asset associated with assets or businesses of the joined group:


(a) for the head company core purposes, the asset ' s * tax cost is set at the joining time at its * tax cost setting amount; and


(b) for the purpose of doing so:


(i) the asset is taken to be an asset of the joining entity that becomes an asset of the head company because subsection 701-1(1) (the single entity rule) applies; and

(ii) it is taken to have a * market value just before the joining time of an amount equal to its market value just after the joining time.

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