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  

Application and object

SECTION 705-10   Application and object of this Subdivision  


This Subdivision has effect, subject to section 705-15 , for the head company core purposes set out in subsection 701-1(2) if an entity (the joining entity ) becomes a * subsidiary member of a * consolidated group (the joined group ) at a particular time (the joining time ). Object

The object of this Subdivision is to recognise the * head company ' s cost of becoming the holder of the joining entity ' s assets as an amount reflecting the group ' s cost of acquiring the entity. That amount consists of the cost of the group ' s * membership interests in the joining entity, increased by the joining entity ' s liabilities and adjusted to take account of the joining entity ' s retained profits, distributions of profits, deductions and losses.

The reason for recognising the * head company ' s cost in this way is to align the costs of assets with the costs of * membership interests, and to allow for the preservation of this alignment until the entity ceases to be a * subsidiary member, in order to:

(a) prevent double taxation of gains and duplication of losses; and

(b) remove the need to adjust costs of membership interests in response to transactions that shift value between them, as the required adjustments occur automatically.


Under Division 711 , the alignment is preserved by recognising the head company's cost of membership interests in the entity if it ceases to be a subsidiary member of the group as the cost of its assets reduced by its liabilities.


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