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 711-70   Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711-65 - application of Division 149 to head company  

711-70(1)  


This section applies if:


(a) the leaving entity held assets at the time it became a *subsidiary member of the old group (disregarding subsection 701-1(1) (the single entity rule)); and


(b) some or all of the assets:


(i) stopped being *pre-CGT assets under Division 149 at a time (the Division 149 time ) when the *head company of the group held them under subsection 701-1(1) (the single entity rule); or

(ii) would have stopped being pre-CGT assets under Division 149 at a time (also the Division 149 time ) when the head company of the group held them under subsection 701-1(1) (the single entity rule) if they had been pre-CGT assets just before that time; and


(c) the leaving entity was a subsidiary member of the group at that time.

711-70(2)  
The *pre-CGT proportion of the leaving entity at the leaving time is taken to be nil.

711-70(3)  
Adjust the old group's *allocable cost amount for the leaving entity as follows:


(a) if the amount under subsection (4) exceeds the amount under subsection (6) - increase the allocable cost amount by the excess;


(b) if the amount under subsection (4) falls short of the amount under subsection (6) - reduce the allocable cost amount by the shortfall.

711-70(4)  
Subject to subsection (5), the amount under this subsection is:


(a) if Subdivision 705-A applied in relation to the leaving entity at the time it became a *subsidiary member of the old group - the total of the amounts that were taken into account under subsection 705-65(1) for *membership interests in the leaving entity at that time; or


(b) otherwise - assuming that Subdivision 705-A had applied in relation to the leaving entity at the time it became a subsidiary member of the old group, the total of the amounts that would have been taken into account under subsection 705-65(1) for membership interests in the leaving entity at that time.

711-70(5)  
For the purposes of subsection (4), if a *membership interest in the leaving entity was covered under paragraph 705-125(2)(a) (pre-CGT interests) when it became a *subsidiary member of the old group, treat the amount that was taken into account for the membership interest under subsection 705-65(1) as the interest's *market value just after the Division 149 time.

711-70(6)  
The amount under this subsection is the old group's *allocable cost amount for the leaving entity, worked out on the assumption that the leaving entity ceased to be a *subsidiary member of the old group just after the Division 149 time.


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