Tax Laws Amendment (2004 Measures No. 2) Act 2004 (83 of 2004)

Schedule 2   Consolidation etc.

Part 5   Partnership leaving consolidated group

Income Tax Assessment Act 1997

32   At the end of Subdivision 713-E (before the link note)

Add:

Special rules where partnership leaves consolidated group

713-250 Partnership leaves group - standard provisions modified

(1) This section applies if a partnership ceases to be a *subsidiary member of a *consolidated group at a time (the leaving time ).

Note: The section applies whether or not any partner that is a subsidiary member of the group also ceases to be a subsidiary member at the leaving time.

(2) Apply the provisions mentioned in subsection 713-205(5) subject to the modifications in the provisions that follow under this *group heading.

713-255 Partnership leaves group - tax cost setting amount for partnership cost setting interests

Overview

(1) Instead of working out *tax cost setting amounts for *membership interests in the partnership, a special rule requires *partnership cost setting interests in the partnership to be worked out. Where other entities cease to be *subsidiary members at the same time, the normal tax cost setting amount rules are applied for membership interests in the other entities, but the special rule is applied for partnership cost setting interests in the partnership.

Tax cost setting amounts for membership interests in partnership not to be worked out

(2) Do not work out *tax cost setting amounts for *membership interests in the partnership.

Partnership is only entity that exits - tax cost setting amount for partnership cost setting interests

(3) Except where the partnership ceases to be a *subsidiary member in circumstances covered by subsection (5), work out in accordance with subsection (4) the *tax cost setting amount just before the leaving time for each *partnership cost setting interest in the partnership held by a partner that is a *member of the group just before the leaving time.

Tax cost setting amount

(4) The *tax cost setting amount is equal to the partner's individual share of the *terminating value of the partnership asset to which the *partnership cost setting interest relates.

Note: For income tax purposes there is no disposal by the head company of any assets of the partnership when it ceases to be a subsidiary member of the group.

Multiple exit case - tax cost setting amounts for both partnership cost setting interests in partnership and membership interests in other entities

(5) If the partnership is one of 2 or more entities that cease to be *subsidiary members of the old group at the same time because of an event happening in relation to one of them, apply section 711-55 as if:

(a) except in paragraph 711-55(3)(a), a reference to *membership interests in an entity, or to the *tax cost setting amount for such interests, where the entity is the partnership, were a reference to *partnership cost setting interests in the partnership, or to the tax cost setting amount for such interests; and

(b) paragraph 711-55(3)(a) were replaced by a requirement that, where the entity in which the membership interests mentioned in subsection 711-55(3) are held is the partnership, subsection (4) of this section is to be applied in working out the tax cost setting amount of the partnership cost setting interests in the partnership.

713-260 Partnership leaves group - tax cost setting amount for assets consisting of being owed certain liabilities

(1) This section applies if:

(a) when the partnership ceases to be a *subsidiary member of the group, a partner remains a *member of the group; and

(b) an asset becomes an asset of the *head company because subsection 701-1(1) (the single entity rule) ceases to apply to the partnership when it ceases to be a subsidiary member; and

(c) the asset is, ignoring that subsection:

(i) the partner's interest in an asset of the partnership consisting of a liability of a member of the group owed to the partnership; or

(ii) the partner's share of a liability of the partnership owed to a member of the group.

(2) The asset's *tax cost is set at the leaving time at a *tax cost setting amount equal to the *market value of the asset.

713-265 Partnership leaves group - adjustments to leaving partner's allocable cost amount

(1) This section has effect in working out the group's *allocable cost amount for a partner in the partnership, if the partner ceases to be a *subsidiary member of the group at the leaving time.

(2) Section 711-35 operates as if:

(a) a deduction to which the partnership becomes entitled (the partnership deduction ) were a deduction to which the partner becomes entitled, to the extent of the partner's individual share of the partnership deduction; and

(b) the deduction to which the partner becomes entitled were of the same kind as the partnership deduction.

Note: These kinds of deductions include acquired deductions and owned deductions (within the meaning of section 711-35).

(3) Section 711-40 operates as if a liability owed by *members of the group to the partnership at the leaving time were a liability owed by members of the group to the partner at that time, to the extent of the partner's individual share of the liability.

(4) If:

(a) according to *accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board, a thing (the partnership liability ) is a liability of the partnership at the leaving time that can or must be recognised in the partnership's statement of financial position; and

(b) for that reason, the partnership liability is not an accounting liability of the partner at the leaving time for the purposes of section 711-45;

then section 711-45 operates as if the partnership liability were an accounting liability of the partner at the leaving time, to the extent of the partner's individual share of the partnership liability.

713-270 Partnership leaves group - certain partnership cost setting interests treated as having been acquired before 20 September 1985

(1) This section applies if any of the assets of the partnership at the leaving time has a *pre-CGT factor under section 713-245.

(2) Apply section 711-65 (simple case where assets have a pre-CGT factor) as if:

(a) the *pre-CGT factor were a pre-CGT factor under section 705-125; and

(b) instead of applying to *membership interests in the partnership, section 711-65 applied to *partnership cost setting interests that relate to the asset of the partnership; and

(c) if the pre-CGT factor for the asset is 1, the number of those partnership cost setting interests worked out under subsection (2) of that section were all of those partnership cost setting interests; and

(d) if the pre-CGT factor for the asset is less than 1, each partnership cost setting interest (the actual interest ) consisted of 2 separate partnership cost setting interests that relate to the asset, as follows:

(i) one partnership cost setting interest, comprised of the fraction of the actual interest that equals the pre-CGT factor, with a pre-CGT factor of 1 for the purposes of paragraph (c) of this subsection;

(ii) the other partnership cost setting interest, equal to the remainder of the actual interest, that is not one of the number of partnership cost setting interests that is worked out under subsection (2) of that section.

(3) Apply section 711-70 (multiple exit case where assets have a pre-CGT factor) as if:

(a) a reference in that section to *membership interests in an entity, where that entity is the partnership, were a reference to *partnership cost setting interests that relate to the assets of the partnership; and

(b) the requirement in subsection (4) of that section to apply subsections 711-65(3) to (6) in relation to a particular entity were, where the entity is the partnership, a requirement to apply subsection (2) of this section.