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  

How to work out the allocable cost amount

SECTION 705-60   705-60   What is the joined group ' s allocable cost amount for the joining entity?  


Work out the joined group ' s allocable cost amount for the joining entity in this way:


Working out the joined group ' s allocable cost amount for the joining entity
Step What the step requires Purpose of the step
1 Start with the step 1 amount worked out under section 705-65, which is about the cost of * membership interests in the joining entity held by * members of the joined group To ensure that the allocable cost amount includes the cost of * acquiring the membership interests
2 Add to the result of step 1 the step 2 amount worked out under section 705-70, which is about the value of the joining entity ' s liabilities To ensure that the joining entity ' s liabilities at the joining time, which are part of the joined group ' s cost of acquiring the joining entity, are reflected in the allocable cost amount
3 Add to the result of step 2 the step 3 amount worked out under:
(a) section 705-90, which is about undistributed, taxed profits accruing to the joined group before the joining time; or
(b) if the joining entity is a trust (and not a * corporate tax entity) - section 713-25, which is about undistributed, realised profits accruing to the joined group before the joining time that could be distributed tax free
To increase the allocable cost amount:
(a) to reflect the undistributed, taxed profits and so prevent double taxation; or
(b) if the joining entity is a trust - to reflect the undistributed, realised profits that could be distributed tax free
3A For each step 3A amount (if any) under section 705-93 (which is about pre-joining time roll-overs):
(a) if the step 3A amount is a *deferred roll-over loss - add to the result of step 3 (as affected by any previous application of this step) the step 3A amount; or
(b) if the step 3A amount is a *deferred roll-over gain - subtract from the result of step 3 (as affected by any previous application of this step) the step 3A amount
To adjust for certain roll-overs before the joining time affecting deferred gains and losses
4 Subtract from the result of step 3A the step 4 amount worked out under section 705-95, which is about pre-joining time distributions out of certain profits To prevent the allocable cost amount reflecting return of part of the amount paid to * acquire the * membership interests in the joining entity
5 Subtract from the result of step 4 the step 5 amount worked out under section 705-100, which is about certain losses accruing to the joined group before the joining time To prevent:

(a) a double benefit arising from the losses; and

(b) losses that cannot be transferred to the * head company, or are cancelled by the head company, under Subdivision 707-A being reinstated in an unrealised form or reducing unrealised gains.
6 Subtract from the result of step 5 the step 6 amount worked out under section 705-110, which is about losses that the joining entity transferred to the * head company under Subdivision 707-A To stop the joined group getting benefits both through higher * tax cost setting amounts for the joining entity ' s assets and through losses transferred to the head company
7 Subtract from the result of step 6 the step 7 amount worked out under section 705-115, which is about certain deductions to which the * head company is entitled To stop the joined group getting benefits both through the * tax cost of the joining entity ' s assets being set and through certain tax deductions of the joining entity being inherited by the head company
8 If the remaining amount is positive, it is the joined group ' s allocable cost amount. Otherwise the joined group ' s allocable cost amount is nil.

Note:

The head company may be taken to have made a capital gain, depending on the amount remaining after applying step 3A: see CGT event L2.


View surrounding sectionsView surrounding sectionsBack to top


This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.