Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 701 - Core rules  

Head company rules  

SECTION 701-25   Tax-neutral consequence for head company of ceasing to hold assets when entity leaves group  

701-25(1)    
If the entity ceases to be a *subsidiary member of the group, this section has effect for the head company core purposes, so far as they relate to the income year in which the entity ceases to be a subsidiary member or any later income year.

Assets to which section applies

701-25(2)    
This section applies in relation to an asset if:

(a) either:

(i) the asset is *trading stock of the *head company; or

(ii) the asset is a *registered emissions unit and an asset of the head company; and

(b) the asset becomes an asset of the entity because subsection 701-1(1) (the single entity rule) ceases to apply to the entity when it ceases to be a *subsidiary member of the group; and

(c) the asset is not again an asset of the head company at or before the end of the income year.

Object

701-25(3)    
The object of this section is to ensure that there is no income tax consequence for the *head company in respect of the asset.

Note:

In the case of assets other than trading stock or registered emissions units, the fact that the head company ceases to hold them when the single entity rules ceases to apply to them would not constitute a disposal or other event having tax consequences for the head company.

Setting value of trading stock at tax-neutral amount

701-25(4)    

If subparagraph (2)(a)(i) applies, the asset is taken to be *trading stock of the *head company at the end of the income year (but not at the start of the next income year) and its *value at that time is taken to be equal to:

(a) if the asset was trading stock of the head company at the start of the income year (including as a result of its *tax cost being set) - the asset's value at that time; or

(b) if paragraph (a) does not apply and the asset is *live stock that was acquired by natural increase - the *cost of the asset; or

(c) in any other case - the amount of the outgoing incurred by the head company in connection with the acquisition of the asset;

increased by the amount of any outgoing forming part of the cost of the asset that was incurred by the head company during its current holding of the asset.

Note:

As a consequence of fixing the trading stock's value at the end of the income year under this subsection, no election would be available under section 70-45 to value the trading stock at that time.

Setting value of registered emissions unit at tax-neutral amount

701-25(5)    

If subparagraph (2)(a)(ii) applies, the asset is taken to be an asset of the *head company at the end of the income year (but not at the start of the next income year) and the head company ' s *value for the asset at that time is taken to be equal to:

(a) if the asset was *held by the head company at the start of the income year - the value of the asset at the start of the income year; or

(b) otherwise - the expenditure incurred by the head company in becoming the holder of the asset.