Income Tax Assessment Act 1997



Division 715 - Interactions between this Part and other areas of the income tax law  

Subdivision 715-A - Treatment of unrealised losses existing when ownership or control of a company changes before or during consolidation  

165-CC tagged assets that affect tax cost setting amounts

SECTION 715-50   Step 1 amount is reduced if membership interest in subsidiary member is 165-CC tagged asset and business continuity test is failed  

The amount taken into account under subsection 705-65(1) (about the cost of membership interests in the joining entity) for a * membership interest that a * member of the joined group holds in the joining entity at the joining time is reduced if:

(a) apart from this section, the amount would be the membership interest ' s * reduced cost base (if appropriate, as modified by a later provision of section 705-65 ); and

(b) the membership interest is at that time a * 165-CC tagged asset of that member, and that member owned it at the * changeover time for that member; and

(c) that member ' s * final RUNL just before the joining time was greater than nil; and

(d) that member does not satisfy the *business continuity test for:

(i) the period (the business continuity test period ) consisting of the * head company ' s * trial year; and

(ii) the time (the test time ) just before the * changeover time.

If at the joining time that * member holds:

(a) 2 or * more membership interests in the joining entity; or

(b) at least one membership interest in the joining entity, and at least one membership interest in another member of the joined group;

this section applies to each such membership interest in whichever order that member determines.

Amount of reduction

The amount taken into account under subsection 705-65(1) is reduced to the * membership interest ' s * market value at the joining time.

However, if that member ' s * final RUNL (as reduced by any previous reductions under this section) is less than the difference between:

(a) the * reduced cost base referred to in paragraph (1)(a); and

(b) the * market value referred to in subsection (3);

the amount taken into account under subsection 705-65(1) is instead reduced by that final RUNL.

That * final RUNL is reduced by the amount of the reduction under subsection (3) or (4).

Non-membership equity interests


Subsection 705-65(6) (which treats *non-membership equity interests as *membership interests) also applies for the purposes of this section.

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