Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 716 - Miscellaneous special rules  

Subdivision 716-G - Low-value and software development pools  

Assets in joining entity's low-value pool

SECTION 716-330   Head company ' s deductions for decline in value of assets in joining entity ' s low-value pool  

716-330(1)    
This section modifies the operation of sections 40-430 , 40-435 , 40-440 , 40-445 , 701-10 and 701-60 and Division 705 for the head company core purposes mentioned in section 701-1 if:

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

(b) there are one or more ^* depreciating assets (the previous pool assets ) that:

(i) were allocated to the joining entity ' s low-value pool; and

(ii) become assets of the ^* head company of the group at the joining time because section 701-1 applies to the joining entity; and

(c) none of the previous pool assets was an asset to which Division 58 applied to affect the joining entity ' s deductions relating to the asset.

Note 1:

Sections 40-430 , 40-435 and 40-440 are relevant to allocating depreciating assets to a low-value pool and to working out the decline in value of assets allocated to a low-value pool. Section 40-445 affects the closing pool balance, and may give rise to assessable income, if a balancing adjustment event happens to such an asset.

Note 2:

Section 701-10 provides that, for each asset the joining entity has at the joining time, the asset ' s tax cost is set at the joining time at the asset ' s tax cost setting amount, which is defined by section 701-60 as the amount worked out under Division 705 .

Note 3:

Division 58 is about capital allowances for depreciating assets previously owned by an exempt entity.

Objects

716-330(2)    
The main objects of this section are:

(a) to clarify how sections 40-430 , 40-435 and 40-440 operate in relation to the previous pool assets; and

(b) to reduce compliance costs by providing that the ^* tax cost is set for all the previous pool assets in one operation, rather than individually for each such asset.

Time of allocation of assets to head company ' s low-value pool

716-330(3)    
Sections 40-430 , 40-435 , 40-440 and 40-445 operate as if the ^* head company of the ^* consolidated group allocated the previous pool assets to a low-value pool for the income year that includes the joining time. Section 701-5 has effect subject to this subsection.

Note 1:

Under section 40-435 , the head company must make a reasonable estimate of the taxable use percentage for each asset.

Note 2:

This subsection affects the percentages and amounts to be taken into account for working out under section 40-440 the decline in value of assets in the pool and the closing pool balance.

Allocating other low-cost assets to head company ' s low-value pool

716-330(4)    
Subsection 40-430(1) operates as if the previous pool assets were ^* low-cost assets.

Note:

This has the effect that the head company must allocate to the low-value pool each low-cost asset it starts to hold in the income year that includes the joining time or a later income year, whether or not the head company starts to hold the asset because of section 701-1 .

If joining time was in first day of joining entity ' s income year

716-330(5)    
If the joining time was in the first day of the joining entity ' s income year, section 40-440 operates as if:

(a) all the previous pool assets were ^* low-value assets; and

(b) the sum of the previous pool assets ' ^* opening adjustable values for the income year that includes the joining time equalled the ^* tax cost setting amount for the hypothetical asset worked out on the basis described in subsections (7), (8) and (9) of this section.

If joining time was not in first day of joining entity ' s income year

716-330(6)    
If the joining time was not in the first day of the joining entity ' s income year, section 40-440 operates as if:

(a) all the previous pool assets were ^* low-cost assets; and

(b) the sum of the previous pool assets ' ^* costs equalled the total of:

(i) the ^* tax cost setting amount for the hypothetical asset worked out on the basis described in subsections (7), (8) and (9) of this section; and

(ii) the expenditure (if any) that was incurred after the joining time (but in the income year that includes that time) and included in the second element of the costs (ignoring this paragraph) of the previous pool assets.

Tax cost is set for assets collectively not individually

716-330(7)    
Sections 701-10 and 701-60 and Division 705 operate as if all the previous pool assets formed a single ^* depreciating asset (the hypothetical asset ), and were not separate assets.

Modified operation of Division 705 for hypothetical asset

716-330(8)    
Sections 705-40 and 705-57 operate as if the joining entity ' s ^* terminating value for the hypothetical asset were the amount worked out using the table:

Modification of basis on which sections 705-40 and 705-57 operate
	If the joining time is:	Sections 705-40 and 705-57 operate as if the joining entity ' s terminating value for the hypothetical asset were:
1	In the first day of an income year of the joining entity	The *closing pool balance for the joining entity ' s low-value pool for the previous income year
2	In another day	The *closing pool balance for the joining entity ' s low-value pool for the non-membership period described in section 701-30 that ends just before the joining time

Note:

Sections 705-40 and 705-57 are about reduction of an asset ' s tax cost setting amount to an amount that may be affected by the joining entity ' s terminating value for the asset.

716-330(9)    
(Repealed by No 56 of 2010)