INCOME TAX ASSESSMENT ACT 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 716 - Miscellaneous special rules  

Subdivision 716-S - Miscellaneous consequences of tax cost setting  

SECTION 716-440   Membership interests in joining entity not subject to CGT under Division 855 - foreign entity ceasing to hold interests  

716-440(1)  
Subsection (3) applies if:


(a) an entity (the joining entity ) becomes a *subsidiary member of a *consolidated group at a time (the joining time ); and


(b) another entity (the disposing entity ) ceased to hold *membership interests in the joining entity during the period that:


(i) started 12 months before the joining time; and

(ii) ended immediately after the joining time; and


(c) a *CGT event happened because the disposing entity ceased to hold the membership interests; and


(d) either:


(i) a *capital gain or *capital loss of the disposing entity from the CGT event was disregarded because of the operation of Division 855 ; or

(ii) if there had been a capital gain or capital loss of the disposing entity from the CGT event, the capital gain or capital loss would have been disregarded because of the operation of Division 855 ; and


(e) section 701-10 (cost to head company of assets of joining entity) applies to the joining entity ' s assets in respect of the joining entity becoming a subsidiary member of the group (disregarding subsection (2) of this section); and


(f) it is reasonable to conclude that, throughout the period mentioned in paragraph (b), the sum of the *total participation interests held by an entity (the control entity ) and its *associates in the joining entity was 50% or more; and


(g) in a case where the control entity is not the disposing entity - it is reasonable to conclude that the sum of the total participation interests held by the control entity and its associates in the disposing entity was 50% or more at the time the CGT event happened.

716-440(2)  
For the purposes of paragraphs (1)(f) and (g), in working out the sum of the *total participation interests held by the control entity and its *associates in another entity, take into account:


(a) a particular *direct participation interest; or


(b) a particular *indirect participation interest;

held in the other entity only once if it would otherwise be counted more than once because the entity holding it is an associate of the control entity.

716-440(3)  
The following provisions do not apply to the joining entity ' s assets in respect of the joining entity becoming a *subsidiary member of the group:


(a) section 701-10 (cost to head company of assets of joining entity);


(b) subsection 701-35(4) (setting value of trading stock at tax-neutral amount);


(c) subsection 701-35(5) (setting value of registered emissions unit at tax-neutral amount).

Note:

This subsection does not affect the application of subsection 701-1(1) (the single entity rule).

716-440(4)  
Subsection (5) applies if:


(a) an entity (the higher level entity ) holds *membership interests in the joining entity (whether directly or through one or more interposed entities) at a time during the period mentioned in paragraph (1)(b); and


(b) the higher level entity becomes a *subsidiary member of the *consolidated group at the joining time; and


(c) the requirement in paragraph (1)(b) is not satisfied (disregarding subsection (5)); and


(d) the requirement in paragraph (1)(b) would be satisfied if the reference in paragraph (1)(b) to membership interests in the joining entity included a reference to membership interests in the higher level entity.

716-440(5)  
Treat the reference in paragraph (1)(b) to *membership interests in the joining entity as including a reference to membership interests in the higher level entity.


 

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.