Income Tax Assessment Act 1997

Part 3-90 inserted by No 68 of 2002, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec 700-1 of the Income Tax (Transitional Provisions) Act 1997 ).

Div 716 inserted by No 117 of 2002, s 3 and Sch 1 item 3, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec 700-1 of the Income Tax (Transitional Provisions) Act 1997 ).

Subdiv 716-S heading substituted by No 15 of 2017, s 3 and Sch 4 item 77, effective 1 April 2017. The heading formerly read:

Subdivision 716-S - Miscellaneous consequences of tax cost setting

Subdiv 716-S inserted by No 56 of 2010, s 3 and Sch 5 item 4, applicable on and after 1 July 2002.

No 56 of 2010, s 3 and Sch 5 item 8 contains the following transitional provision:

8 Transitional provision - use of the tax cost setting amount  
(1)
This item applies if:

(a) the tax cost of an asset was set at the time (the joining time ) an entity (the joining entity ) became a subsidiary member of a consolidated group or MEC group, at the asset's tax cost setting amount; and

(b) the asset is a trade receivable that is denominated in foreign currency; and

(c) CGT event C2 happens in relation to the asset:

(i) after the joining time; and

(ii) before 23 August 2006; and

(d) just before the CGT event, the head company of the group held the asset because of the operation of subsection 701-1(1) of the Income Tax Assessment Act 1997 (the single entity rule); and

(e) disregarding section 118-20 of that Act, there is a capital gain or capital loss from the event; and

(f) the head company of the group makes a choice to apply this item, in accordance with subitems (4) and (5).

(2)
These provisions do not apply to the CGT event:

(a) section 6-5 of the Income Tax Assessment Act 1997 (about ordinary income);

(b) any other provision of that Act that includes an amount in assessable income, other than a provision in Part 3-1 or 3-3 of that Act;

(c) section 8-1 of that Act (about amounts you can deduct);

(d) any other provision of that Act that allows you to deduct an amount from your assessable income;

(e) section 118-20 of that Act.

(3)
The provisions referred to in subitem (2) can apply to the CGT event to the extent that any capital gain or capital loss from the event is attributable to currency exchange rate fluctuations.

(4)
A choice mentioned in paragraph (1)(f) must be made:

(a) by the day the head company lodges its income tax return for the income year in which the relevant CGT event happened; or

(b) within a further time allowed by the Commissioner.

(5)
The way the head company prepares its income tax return is sufficient evidence of the making of the choice.

S 716-405 repealed by No 99 of 2012, s 3 and Sch 3 item 43, effective 29 June 2012. For application provisions see note under s 701-55(5C) . S 716-405 formerly read:

SECTION 716-405 Tax cost setting and rights to future income - deduction  
716-405(1)
This section applies if:

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

(b) subsection 701-55(5C) applies in relation to the asset at the joining time.

Note:

Subsection 701-55(5C) deals with assets covered by section 716-410 (Rights to amounts that are expected to be included in assessable income after joining time).

716-405(2)
An entity qualified for a deduction under subsection (5) for the asset for an income year ending after the joining time can deduct, for that income year:

(a) unless paragraph (b) applies - the amount determined under subsection (3A); or

(b) if it is reasonable to expect that no amount will be included in the assessable income of an entity qualified for a deduction under subsection (5) for the asset for any later income year - the * unexpended tax cost setting amount for the asset for that income year.

716-405(3)
Paragraph (2)(b) does not apply in relation to an entity qualified for a deduction under subsection (5) for the asset for that income year if:

(a) the entity is the * head company of the group; and

(b) another entity ceased to be a * subsidiary member of the group in that income year; and

(c) the other entity can deduct an amount under subsection (2) for that income year because it is also qualified for a deduction under subsection (5) for the asset for that income year.

716-405(3A)
For the purposes of paragraph (2)(a), the amount is the lesser of the following:

(a) the * unexpended tax cost setting amount for the asset for that income year;

(b) the unexpended tax cost setting amount for the asset for the first income year ending after the joining time, divided by the lesser of:

(i) 10; or

(ii) if the contract or agreement giving rise to the * right to future income mentioned in paragraph 716-410(a) is for a specified period - the number of days in that period that end after the joining time, divided by 365 and rounded upwards to the nearest whole number.

716-405(4)
The unexpended tax cost setting amount for the asset for an income year is the * tax cost setting amount for the asset, reduced by:

(a) the amounts (if any) of all deductions under this section in respect of the asset for previous income years ending after the joining time; and

(b) in determining the amount of a deduction under this section in respect of the asset for that income year for an entity that ceased to be a * subsidiary member of the group in that income year - the amount (if any) that the * head company of the group can deduct under this section in respect of the asset for that income year.

716-405(5)
An entity is qualified for a deduction under this subsection for an income year for the asset if:

(a) the entity:

(i) is the * head company of the group; and

(ii) held the asset at a time in that income year (whether or not because of the operation of subsection 701-1(1) (the single entity rule)); or

(b) the entity:

(i) held the asset at a time in that income year; and

(ii) ceased to be a * subsidiary member of the group in that income year or an earlier income year.

716-405(6)
An amount deducted under this section:

(a) is not to be deducted under any other provision of this Act; and

(b) is not to be taken into account in determining an amount that is included in the assessable income of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(c) is not to be taken into account in determining an amount of a deduction of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(d) despite paragraphs (b) and (c), is taken never to have been included in any of the elements of the * cost base of the asset.

S 716-405 substituted by No 99 of 2012, s 3 and Sch 3 item 23, effective 29 June 2012. For application provisions see note under s 701-55(5C) . S 716-405 formerly read:

SECTION 716-405 Tax cost setting and rights to future income - deduction  
716-405(1)
This section applies if:

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

(b) subsection 701-55(5C) applies in relation to the asset at the joining time.

Note:

Subsection 701-55(5C) deals with assets covered by section 716-410 (Rights to amounts that are expected to be included in assessable income after joining time).

716-405(2)
An entity qualified for a deduction under subsection (5) for the asset for an income year ending after the joining time:

(a) if the entity is the * head company of the group and the entity expects that a recoverable debt will arise in respect of the work, goods or services mentioned in subsection 701-63(6) in relation to the asset within 12 months after the joining time - can deduct, for that income year, the * unexpended tax cost setting amount for the asset; or

(b) if paragraph (a) does not apply and one or more recoverable debts arise, in that income year, in respect of the work, goods or services mentioned in subsection 701-63(6) in relation to the asset - can deduct, for that income year, the lesser of:

(i) the unexpended tax cost setting amount for the asset for that income year; and

(ii) the total of those recoverable debts; or

(c) if paragraphs (a) and (b) do not apply - cannot deduct an amount under this section in respect of the asset for that income year.

[ CCH Note: There is no s 716-405(3).]

716-405(4)
The unexpended tax cost setting amount for the asset for an income year is the * tax cost setting amount for the asset, reduced by:

(a) the amounts (if any) of all deductions under this section in respect of the asset for previous income years ending after the joining time; and

(b) in determining the amount of a deduction under this section in respect of the asset for that income year for an entity that ceased to be a * subsidiary member of the group in that income year - the amount (if any) that the * head company of the group can deduct under this section in respect of the asset for that income year.

716-405(5)
An entity is qualified for a deduction under this subsection for an income year for the asset if:

(a) the entity:

(i) is the * head company of the group; and

(ii) held the asset at a time in that income year (whether or not because of the operation of subsection 701-1(1) (the single entity rule)); or

(b) the entity:

(i) held the asset at a time in that income year; and

(ii) ceased to be a * subsidiary member of the group in that income year or an earlier income year.

716-405(6)
An amount deducted under this section:

(a) is not to be deducted under any other provision of this Act; and

(b) is not to be taken into account in determining an amount that is included in the assessable income of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(c) is not to be taken into account in determining an amount of a deduction of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(d) despite paragraphs (b) and (c), is taken never to have been included in any of the elements of the * cost base of the asset.

S 716-405 substituted by No 99 of 2012, s 3 and Sch 3 item 9, effective 29 June 2012. For application provisions see note under s 701-55(5C) . S 716-405 formerly read:

SECTION 716-405 Tax cost setting and rights to future income - deduction  
716-405(1)
This section applies if:

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

(b) subsection 701-55(5C) applies in relation to the asset at the joining time.

Note:

Subsection 701-55(5C) deals with assets covered by section 716-410 (Rights to amounts that are expected to be included in assessable income after joining time).

716-405(2)
An entity qualified for a deduction under subsection (5) for the asset for an income year ending after the joining time can deduct, for that income year:

(a) unless paragraph (b) applies - the amount determined under subsection (3A); or

(b) if it is reasonable to expect that no amount will be included in the assessable income of an entity qualified for a deduction under subsection (5) for the asset for any later income year - the unexpended tax cost setting amount for the asset for that income year.

716-405(3)
Paragraph (2)(b) does not apply in relation to an entity qualified for a deduction under subsection (5) for the asset for that income year if:

(a) the entity is the *head company of the group; and

(b) another entity ceased to be a *subsidiary member of the group in that income year; and

(c) the other entity can deduct an amount under subsection (2) for that income year because it is also qualified for a deduction under subsection (5) for the asset for that income year.

716-405(3A)
For the purposes of paragraph (2)(a), the amount is the lesser of the following:

(a) the *unexpended tax cost setting amount for the asset for that income year;

(b) the unexpended tax cost setting amount for the asset for the first income year ending after the joining time, divided by the lesser of:

(i) 10; or

(ii) if the contract or agreement giving rise to the valuable right mentioned in paragraph 716-410(a) is for a specified period - the number of days in that period that end after the joining time, divided by 365 and rounded upwards to the nearest whole number.

716-405(4)
The unexpended tax cost setting amount for the asset for an income year is the *tax cost setting amount for the asset, reduced by:

(a) the amounts (if any) of all deductions under this section in respect of the asset for previous income years ending after the joining time; and

(b) in determining the amount of a deduction under this section in respect of the asset for that income year for an entity that ceased to be a *subsidiary member of the group in that income year - the amount (if any) that the *head company of the group can deduct under this section in respect of the asset for that income year.

716-405(5)
An entity is qualified for a deduction under this subsection for an income year for the asset if:

(a) the entity:

(i) is the *head company of the group; and

(ii) held the asset at a time in that income year (whether or not because of the operation of subsection 701-1(1) (the single entity rule)); or

(b) the entity:

(i) held the asset at a time in that income year; and

(ii) ceased to be a *subsidiary member of the group in that income year or an earlier income year.

716-405(6)
An amount deducted under this section:

(a) is not to be deducted under any other provision of this Act; and

(b) is not to be taken into account in determining an amount that is included in the assessable income of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(c) is not to be taken into account in determining an amount of a deduction of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(d) despite paragraphs (b) and (c), is taken never to have been included in any of the elements of the *cost base of the asset.

S 716-405 inserted by No 56 of 2010, s 3 and Sch 5 item 4, applicable on and after 1 July 2002. For transitional provision see note under Subdiv 716-S .