Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

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  

Tax cost setting amount for assets that joining entity brings into joined group

SECTION 705-25   Tax cost setting amount for retained cost base assets  

705-25(1)  
This section states what the * tax cost setting amount is for a * retained cost base asset. Australian currency

705-25(2)  


If the * retained cost base asset is covered by paragraph (a), (b) or (ba) of the definition of that expression and is not covered by another subsection of this section, its * tax cost setting amount is equal to the amount of the Australian currency concerned. Qualifying securities

705-25(3)  
If the * retained cost base asset is a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936 ), the * tax cost setting amount for the qualifying security is instead equal to the joining entity ' s * terminating value for the asset. Entitlements to pre-paid services etc.

705-25(4)  
If the * retained cost base asset is covered by paragraph (c) of the definition of that expression, its * tax cost setting amount is equal to the amount of the deductions to which the * head company is entitled under section 701-5 (the entry history rule) in respect of the expenditure that gave rise to the entitlement.

Note:

If the total amount to be treated as tax cost setting amounts for retained cost base assets exceeds the joined group ' s allocable cost amount for the joining entity, the head company makes a capital gain equal to the excess: see CGT event L3.

Financial arrangements to which Subdivision 250-E applies

705-25(4A)  


The *tax cost setting amount is instead equal to the joining entity ' s *terminating value for the *retained cost base asset if the asset is a *financial arrangement to which Subdivision 250-E applies immediately before the joining time. Rights to payments in respect of uncompleted work etc

705-25(4B)  


If the *retained cost base asset is covered by paragraph (d) or (e) of the definition of that expression, its *tax cost setting amount is equal to the joining entity ' s *terminating value for the asset. Retained cost base asset

705-25(5)  
A retained cost base asset is:


(a) Australian currency, other than * trading stock or * collectables of the joining entity; or


(b) a right to receive a specified amount of such Australian currency, other than a right that is a marketable security within the meaning of section 70B of the Income Tax Assessment Act 1936 ; or

Example:

A debt or a bank deposit.


(ba) a unit in a *cash management trust, if:


(i) the redemption value of the unit is expressed in Australian dollars; and

(ii) the redemption value of the unit cannot increase; or


(c) a right to have something done under an * arrangement under which:


(i) expenditure has been incurred in return for the doing of the thing; and

(ii) the thing is required or permitted to be done, or to cease being done, after the expenditure is incurred; or


(d) a * right to future income (other than a * WIP amount asset); or


(e) a *depreciating asset that the joining entity *holds as a result of a *balancing adjustment event mentioned in paragraph 417-30(2)(b) .

Note 1:

There are some additional retained cost base assets for a joining entity that is a life insurance company: see Subdivision 713-L . The tax cost setting amount for those assets is worked out under that Subdivision.

Note 2:

The joining entity ' s right to receive lease payments under a finance lease is treated as a retained cost base asset in some circumstances (see paragraph 705-56(3) (b)).


 

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