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ATO Interpretative Decision

ATO ID 2003/740 (Withdrawn)

Income Tax

Consolidation - depreciating assets
FOI status: may be released
  • This ATO ID is withdrawn as the current ATO position on this issue is contained in ATO ID 2005/339
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Does section 701A-10 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997) apply to a head company in respect of an internally created asset that is held as a depreciating asset in the hands of a joining entity, though it was not a depreciating asset in the hands of the entity that created the asset?

Decision

No. This section only applies to internally created assets which were depreciating assets at the time of creation.

Facts

Head Company X forms a consolidated group with its wholly owned subsidiaries, Company B and Company C.

Company B created an internally generated asset and did not hold it as a depreciating asset.

The asset was transferred to Company C before the group consolidated.

Company C holds it as a depreciating asset.

Reasons for Decision

Subsection 701A-10(1) of the IT(TP)A 1997 only applies to assets that were depreciating assets in the hands of the creator. This is because paragraph 701A-10(1)(a) of the IT(TP)A 1997 refers to 'a depreciating asset'. Subsequent references within the section to 'the asset' obtain their meaning from the first occurring use of the term 'asset' in paragraph 701A-10(1)(a) of the IT(TP)A 1997 being a 'depreciating asset'.

Paragraph 701A-10(1)(d) of the IT(TP)A 1997 only refers to expenditure incurred in constructing or creating a depreciating asset. In this instance, Company B's internally created asset was not a depreciating asset at the time of creation. Accordingly, the conditions in paragraph 701A-10(1)(d) of the IT(TP)A 1997 are not met. Therefore, section 701A-10 will not apply to the head company.

Date of decision:  11 June 2003

Year of income:  Year ending 30 June 2003 Year ending 30 June 2004

Legislative References:
Income Tax (Transitional Provisions) Act 1997
   subsection 701A-10(1)
   paragraph 701A-10(1)(a)
   paragraph 701A-10(1)(d)

Related ATO Interpretative Decisions
ATO ID 2003/741

Keywords
Adjustable value of a depreciating asset
Adjusted market value of the consolidated group
Consolidation
Consolidation - assets
Consolidation - joining

Business Line:  Consolidations Centre of Expertise

Date of publication:  22 August 2003

ISSN: 1445-2782

history
  Date: Version:
  11 June 2003 Original statement
You are here 25 November 2005 Archived

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