INCOME TAX (TRANSITIONAL PROVISIONS) ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 701 - Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002-03 and 2003-04 financial years  

Subdivision 701-B - Modified application of provisions  

SECTION 701-20   Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities  

When section applies

701-20(1)  
This section applies if any of the transitional entities in the transitional group is a chosen transitional entity. Allocable cost amount to be worked out in special way

701-20(2)  
If this section applies, the group's allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non-chosen subsidiary ) is worked out in a special way. How to work out allocable cost amount

701-20(3)  
The allocable cost amount for each non-chosen subsidiary is the sum of:


(a) the head company adjusted allocable amount for the non-chosen subsidiary (see subsection (4)); and


(b) for each sub-group (see subsection (6)) that exists in relation to the non-chosen subsidiary - the sub-group's notional allocable cost amount (see subsection(5)) for the non-chosen subsidiary. Head company adjusted allocable amount

701-20(4)  
The head company adjusted allocable amount for the non-chosen subsidiary is the amount that would be the transitional group's allocable cost amount for that entity if:


(a) the holding of all sub-group membership interests were disregarded; and


(b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705-60 of the Income Tax Assessment Act 1997 was taken into account:


Market value of head company's direct and
indirect membership interests in
                                    non-chosen subsidiary                                    
Market value of all membership interests
in non-chosen subsidiary

where:

market value of all membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that are held by entities that become members of the group at that time.

market value of head company's direct and indirect membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub-group in relation to the non-chosen subsidiary.

Sub-group's notional allocable cost amount

701-20(5)  
For each sub-group that exists in relation to the non-chosen subsidiary, there is a sub-group's notional allocable cost amount . That amount is the amount that would be a consolidated group's allocable cost amount for the non-chosen subsidiary if:


(a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non-chosen subsidiary and the entities comprising the sub-group; and


(b) the chosen transitional entity in the sub-group were the head company of the consolidated group; and


(c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub-group membership interests (see subsection (6)) in relation to the sub-group, and any such entity held those membership interests during the period when it actually held them; and


(d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705-60 of the Income Tax Assessment Act 1997 was taken into account:


Market value of chosen transitional entity's direct and
indirect membership interests in non-chosen
                                                                            subsidiary                                                                            
Market value of all membership interests
in non-chosen subsidiary

where:

market value of all membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that are held by entities that become members of the group at that time.

market value of chosen transitional entity's direct and indirect membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub-group.

Sub-group and sub-group membership interests

701-20(6)  
If a chosen transitional entity holds membership interests in a non-chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non-chosen subsidiary:


(a) the chosen transitional entity and each interposed non-chosen subsidiary comprise a sub-group in relation to the non-chosen subsidiary (unless the non-chosen subsidiary is included in a sub-group in relation to another non-chosen subsidiary); and


(b) the following membership interests are the sub-group membership interests in relation to the sub-group:


(i) the membership interests that the chosen transitional entity holds directly in the non-chosen subsidiary or in any of the interposed non-chosen subsidiaries;

(ii) the membership interests that each interposed non-chosen subsidiary holds directly in the non-chosen subsidiary or in any of the other interposed non-chosen subsidiaries.



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