Income Tax Assessment Act 1997
CHAPTER 3
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SPECIALIST LIABILITY RULES
PART 3-90
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CONSOLIDATED GROUPS
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).
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.
Division 705
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Tax cost setting amount for assets where entities become subsidiary members of consolidated groups
Subdivision 705-A
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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.
705-40(1)
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.
705-40(2)
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).
Note:
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.
705-40(3)
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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