Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

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 form loss denial pools of head company when consolidated group is formed

SECTION 715-70   Assets of subsidiary member that become those of head company  

715-70(1)  
At the time (the formation time ) when an entity becomes a * subsidiary member of a * consolidated group, a loss denial pool of the * head company of the group is created if:


(a) the formation time is not a * changeover time for the head company; and


(b) the entity is a chosen transitional entity under Division 701 of the Income Tax (Transitional Provisions) Act 1997 ; and


(c) subsection (2) or (4) of this section is satisfied.

Note 1:

If the entity is a chosen transitional entity, section 701-15 of the Income Tax (Transitional Provisions) Act 1997 prevents:

  • · section 701-10 (cost to head company of assets of joining entity); and
  • · subsection 701-35(4) (setting value of trading stock at tax-neutral amount);
  • of this Act from applying to the entity ' s assets in relation to the formation time.

    Note 2:

    The pool is distinct from any other loss denial pool of the head company, for example, one created under this section because another entity becomes a subsidiary member of the group at the formation time.

    Joining entity has 165-CC tagged assets

    715-70(2)  
    This subsection is satisfied if:


    (a) a * CGT asset of the entity, or each of 2 or more CGT assets of the entity:


    (i) is a * 165-CC tagged asset of the entity at the formation time; and

    (ii) was owned by the entity at the * changeover time; and

    (iii) is not a * membership interest in a * member of the group; and

    (iv) is not a right or option (including a contingent right or option), created or issued by a member of the group, to acquire such a membership interest; and

    (v) is not constituted by a liability owed to the entity by a member of the group at the formation time; and


    (b) the entity ' s * final RUNL just before the formation time (as reduced by any reductions under section 715-50 or 715-55 ) was greater than nil; and


    (c) the entity does not satisfy the *business continuity test for:


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

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

    Paragraph (2)(b) has the effect that if the entity has 165-CC tagged assets that are affected by section 715-50 or 715-55 (because they are membership interests in, or accounting liabilities owed by, another group member), those sections are applied before this section.

    715-70(3)  
    When it is created because of subsection (2), the pool consists of the one or more * CGT assets referred to in paragraph (2)(a), and its loss denial balance is equal to the * final RUNL referred to in paragraph (2)(b).

    Note:

    170-D deferred losses on 165-CC tagged assets of the head company may be added to the pool by subsection 715-355(2) .

    Entity has loss denial pool

    715-70(4)  
    This subsection is satisfied if, just before the formation time, the entity had a * loss denial pool.

    715-70(5)  
    When it is created because of subsection (4), the * head company ' s loss denial pool:


    (a) consists of the one or more * CGT assets of which the entity ' s * loss denial pool consisted; and


    (b) has a loss denial balance equal to the * loss denial balance of the entity ' s loss denial pool;

    just before the formation time.


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