INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 711 - Tax cost setting amount for membership interests where entities cease to be subsidiary members of consolidated groups  

Tax cost setting amount for membership interests etc.  

SECTION 711-20   What is the old group ' s allocable cost amount for the leaving entity?  

711-20(1)  


Work out the old group ' s allocable cost amount for the leaving entity in this way:


Working out the old group ' s allocable cost amount for the leaving entity
Step What the step requires Purpose of the step
1 Start with the step 1 amount worked out under section 711-25, which is about the *terminating values of the leaving entity ' s assets just before the leaving time. To ensure that the allocable cost amount includes the cost of the assets.
2 Add to the result of step 1 the step 2 amount worked out under section 711-35, which is about the value of deductions inherited by the leaving entity that are not reflected in the *terminating value of the leaving entity ' s assets just before the leaving time. To ensure that the value of the deductions is reflected in the allocable cost amount.
3 Add to the result of step 2 the step 3 amount worked out under section 711-40, which is about liabilities owed by *members of the old group to the leaving entity at the leaving time. To ensure that the liabilities, which are not recognised while the leaving entity is taken to be part of the *head company by subsection 701-1(1), are reflected in the allocable cost amount.
4 Subtract from the result of step 3 the step 4 amount worked out under section 711-45, which is about:

(a) the leaving entity ' s liabilities just before the leaving time; and
(b) *membership interests in the leaving entity that are not held by *members of the old group.
To ensure that the allocable cost amount is reduced to reflect the liabilities and the value of the membership interests.
5 If the amount remaining after step 4 is positive, it is the old group ' s allocable cost amount for the leaving entity. Otherwise the old group ' s allocable cost amount is nil.
6 (Repealed by No 90 of 2002)

Note:

If the amount remaining after step 4 is negative, the head company is taken to have made a capital gain equal to the amount: see CGT event L5.

Recalculation in order to work out amount of capital loss

711-20(2)  
If it is necessary to work out whether the * head company makes a capital loss for a * CGT event that happens at or after the leaving time in relation to any of the * membership interests, the old group ' s allocable cost amount for the leaving entity is instead worked out as if the head company ' s * terminating value for any asset covered by subsection 705-30(4) (as it applies for the purposes of section 711-30 ) were instead equal to the asset ' s * reduced cost base just before the leaving time.


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