New Business Tax System (Consolidation and Other Measures) Act 2003 (16 of 2003)

Schedule 12   Consolidation: MEC group cost setting rules

Income Tax Assessment Act 1997

4   At the end of Subdivision 719-C

Add:

719-170 Modified effect of subsections 705-175(1) and 705-185(1)

(1) This section applies if all of the *members of a *MEC group (the acquired group ) become members of another MEC group, or of a *consolidated group, at a particular time (the acquisition time ) as a result of the *acquisition of *membership interests in:

(a) the *head company of the acquired group; and

(b) other entities that were *eligible tier-1 companies of the acquired group just before the acquisition time.

(2) Subsections 705-175(1) and 705-185(1) have effect as if a *membership interest in an entity mentioned in paragraph (1)(b) of this section were a membership interest in the *head company of the acquired group.

Note 1: If the acquiring group is a MEC group, and the head company of the acquired group becomes an eligible tier-1 company of the acquiring group, the assets of the members of the acquired group do not have their tax cost reset at the acquisition time. This is because:

(a) section 719-160 treats an entity becoming an eligible tier-1 company of the acquiring group as if it were a part of the head company of that group; and

(b) section 705-185 treats the subsidiary members of the acquired group as part of the head company of the acquired group.

Note 2: If:

(a) the acquiring group is a MEC group, but the head company of the acquired group does not become an eligible tier-1 company of the acquiring group; or

(b) the acquiring group is a consolidated group and the acquired group is a MEC group;

the assets of the members of the acquired group have their tax cost reset at the acquisition time (section 719-160 does not preclude tax cost resetting in these cases). For the purposes of resetting the tax cost of those assets, section 705-185 treats the subsidiary members of the acquired group as part of the head company of the acquired group.