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 705-56   Modification for tax cost setting in relation to finance leases  

705-56(1)  
This section applies if, just before the joining time:


(a) the joining entity is the lessor or lessee under a lease of a * depreciating asset (the underlying asset ) to which Division 40 applies; and


(b) the joining entity classifies the lease, in accordance with its *accounting principles for tax cost setting, as a finance lease.

Joining entity is lessor

705-56(2)  
If the joining entity is the lessor under the lease and * holds the underlying asset just before the joining time, subsection (5) applies, in relation to the joining entity, to the asset that is the joining entity ' s right to receive lease payments.

Note:

In this situation, the underlying asset will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701-10 ).

705-56(3)  
If the joining entity is the lessor under the lease and does not * hold the underlying asset just before the joining time:


(a) subsection (5) applies to the underlying asset in relation to the joining entity; and


(b) for the purposes of this Division:


(i) the joining entity ' s right to receive lease payments is taken to be a * retained cost base asset; and

(ii) the * tax cost setting amount of that retained cost base asset is taken to be equal to its * market value just before the joining time.
Note:

In this situation, the asset that is the joining entity ' s right to receive lease payments will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701-10 ).

Joining entity is lessee

705-56(4)  
If the joining entity is the lessee under the lease and does not * hold the underlying asset just before the joining time:


(a) subsection (5) applies to the underlying asset in relation to the joining entity; and


(b) the liability that is the lessee ' s obligation to make lease payments is not taken into account under subsection 705-70(1) .

Note:

If the joining entity is the lessee under the lease and holds the underlying asset just before the joining time:

  • (a) the underlying asset will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701-10 ); and
  • (b) the liability that is the lessee ' s obligation to make lease payments is taken into account under subsection 705-70(1) .
  • Tax cost of certain assets set at nil

    705-56(5)  
    If this subsection applies to an asset, in relation to the joining entity:


    (a) the asset is not taken into account under paragraph 705-35(1) (b) or (c); and


    (b) the asset ' s * tax cost setting amount is taken to be nil.


     

    Disclaimer and notice of copyright applicable to materials provided by CCH Australia Limited

    CCH Australia Limited ("CCH") believes that all information which it has provided in this site is accurate and reliable, but gives no warranty of accuracy or reliability of such information to the reader or any third party. The information provided by CCH is not legal or professional advice. To the extent permitted by law, no responsibility for damages or loss arising in any way out of or in connection with or incidental to any errors or omissions in any information provided is accepted by CCH or by persons involved in the preparation and provision of the information, whether arising from negligence or otherwise, from the use of or results obtained from information supplied by CCH.

    The information provided by CCH includes history notes and other value-added features which are subject to CCH copyright. No CCH material may be copied, reproduced, republished, uploaded, posted, transmitted, or distributed in any way, except that you may download one copy for your personal use only, provided you keep intact all copyright and other proprietary notices. In particular, the reproduction of any part of the information for sale or incorporation in any product intended for sale is prohibited without CCH's prior consent.