Income Tax Assessment Act 1997



Division 701 - Core rules  

Entity rules  

SECTION 701-50   Cost of certain membership interests of which entity becomes holder on leaving group  


(a) the entity and one or more other entities cease to be * subsidiary members of the group at the same time because of an event happening in relation to one of them; and

(b) when the entity ceases to be a subsidiary member, it holds an asset consisting of a * membership interest in any of the other entities;

this section has effect for the entity core purposes.


The cost of any * membership interest that one of the entities holds in another is to be treated in the same way as membership interests held by the * head company. In both cases the object is to preserve the alignment of costs for membership interests and assets (that was established when each entity became a * subsidiary member) by recognising the cost of those interests, when it ceases to be a subsidiary member, as an amount equal to the cost of the entity's assets at that time reduced by the amount of its liabilities. Setting tax cost of membership interests

The asset's * tax cost is set just before the entity ceases to be a * subsidiary member of the group at the asset's * tax cost setting amount.


If the asset consists of a membership interest in a partnership, Subdivision 713-E sets the tax cost of interests in partnership assets, rather than membership interests in the partnership.


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