Income Tax Assessment Act 1997



Division 705 - Tax cost setting amount for assets where entities become subsidiary members of consolidated groups  

Subdivision 705-A - Basic case: a single entity joining an existing consolidated group  

How to work out a pre-CGT factor for assets of joining entity

SECTION 705-125   Pre-CGT proportion for joining entity  



Because intra-group * membership interests in the joining entity are disregarded under subsection 701-1(1) (the single entity rule), the object of this section is to provide a mechanism to ensure that the benefit of the pre-CGT status of those interests is not lost. That mechanism involves:

(a) working out the proportion (measured by market value) of the membership interests in the joining entity that have pre-CGT status; and

(b) if the joining entity later ceases being a member of the group, attaching pre-CGT status to that proportion of membership interests in it (see section 711-65 ), subject to integrity rules (see section 711-70 ).

How to work out pre-CGT proportion


The pre-CGT proportion is the amount worked out by dividing:

(a) the sum of the *market value of each *membership interest in the joining entity that is:

(i) held by a *member of the group at the joining time; and

(ii) is a *pre-CGT asset;


(b) the sum of the market value of each membership interest in the joining entity that is held by a member of the group at the joining time.

(Repealed by No 56 of 2010)

Modification if joining entity is a trust


If the joining entity is a trust, a * membership interest in it is not taken into account under subsection (2) unless the membership interest is either a unit or an interest in the trust.

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