Taxation Determination

TD 2005/41

Income tax: consolidation: cost setting: do the assets of a transitional foreign-held subsidiary retain their existing tax values on formation of a consolidated or a MEC group?

• Please note that the PDF version is the authorised version of this ruling.

FOI status:

may be released

Preamble

1. Yes. The assets of a transitional foreign-held subsidiary (TFHS) (as defined in section 701C-20 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997)) retain their existing tax values on formation of a consolidated or MEC (multiple entry consolidated) group.

2. When a consolidated or MEC group is formed, TFHSs are treated for the purposes of the tax cost setting provisions in section 701-10, and Subdivisions 705-A and 705-B, of the Income Tax Assessment Act 1997 (ITAA 1997) as part of the head company of the group rather than as separate entities (section 701C-30 of the IT(TP)A 1997).

3. The tax costs of a head company's assets are not set on formation of a consolidated or MEC group (subsection 701-10(4) of the ITAA 1997). The assets of a TFHS therefore retain their existing tax values.

Date of effect

4. This Determination applies to years commencing both before and after its date of issue. However, it does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

Commissioner of Taxation
19 October 2005

Previously issued as TD 2005/D9

References

ATO references:
NO 2004/12063

Related Rulings/Determinations:

TR 92/20

Subject References:
consolidated group tax cost setting rules
consolidation
cost setting rules
MEC group
subsidiary member of a consolidated group
subsidiary member of a MEC group
transitional foreign-held subsidiaries

Legislative References:
TAA 1953 Pt IVAAA
ITAA 1997 701-10
ITAA 1997 701-10(4)
ITAA 1997 Subdiv 705-A
ITAA 1997 Subdiv 705-B
IT(TP)A 1997 701C-20
IT(TP)A 1997 701C-30