INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 709 - Other rules applying when entities become subsidiary members etc.  

Subdivision 709-B - Imputation issues  

Operative provisions

SECTION 709-175   Head company is former exempting entity  

709-175(1)  
Subsection (2) operates if:


(a) the * head company of a * consolidated group is a * former exempting entity; and


(b) a * corporate tax entity becomes a * subsidiary member of the group at a time (also the joining time ); and


(c) the entity is an * exempting entity at the joining time.

709-175(2)  
These rules apply to the * consolidated group.


Rules applying to *consolidated group
Item Rule
1 There is no change to the status of the *head company
2 If the subsidiary member ' s *franking account has a *franking surplus at the joining time:
(a) a debit equal to that surplus arises in that account at the joining time; and
(b) a credit equal to that surplus arises in the *exempting account of the *head company at the joining time
3 Subsection 709-60(2) (about franking surplus) does not apply to the *subsidiary member

Note 1:

If the subsidiary ' s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709-60(3) .

Note 2:

The subsidiary ' s franking account does not operate while it is a member of the group: see section 709-65 .

709-175(3)  
Subsection (4) operates if:


(a) the * head company of a * consolidated group is a * former exempting entity; and


(b) a * corporate tax entity becomes a * subsidiary member of the group at a time (also the joining time ); and


(c) the entity is a * former exempting entity at the joining time.

709-175(4)  
These rules apply to the * consolidated group.


Rules applying to *consolidated group
Item Rule
1 There is no change to the status of the *head company
2 If the *subsidiary member ' s *exempting account has an *exempting surplus at the joining time:
(a) a debit equal to that surplus arises in that account at the joining time; and
(b) a credit equal to that surplus arises in the exempting account of the *head company at the joining time
3 If the *subsidiary member ' s *exempting account has an *exempting deficit at the joining time:
(a) a credit equal to that deficit arises in that account at the joining time; and
(b) a debit equal to that deficit arises in the subsidiary ' s *franking account just before the joining time
4 The *subsidiary member ' s *exempting account does not operate during the period:
(a) starting just after the joining time; and
(b) ending when the entity ceases to be a subsidiary member of the group

Note 1:

If the subsidiary ' s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709-60(3) . This deficit may be increased by item 3 in the table in subsection (4).

Note 2:

The subsidiary ' s franking account does not operate while it is a member of the group: see section 709-65 .

709-175(5)  
There is no change to the status of the * head company of a * consolidated group if:


(a) the head company is a * former exempting entity; and


(b) a * corporate tax entity becomes a * subsidiary member of the group; and


(c) the entity is neither an * exempting entity nor a former exempting entity at the joining time.

Note 1:

If the subsidiary ' s franking account is in surplus, that surplus will be transferred to the head company ' s franking account: see subsection 709-60(2) .

Note 2:

If the subsidiary ' s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709-60(3) .

Note 3:

The subsidiary ' s franking account does not operate while it is a member of the group: see section 709-65 .


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