Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 701 - Core rules  

Entity rules  

SECTION 701-35   Tax-neutral consequence for entity of ceasing to hold assets when it joins group  

701-35(1)    
When the entity becomes a *subsidiary member of the group, this section has effect for the entity core purposes.

Assets to which section applies

701-35(2)    

This section applies in relation to an asset if:

(a) the asset is *trading stock of the entity just before it becomes a *subsidiary member of the group; or

(b) the asset is:

(i) a *registered emissions unit; and

(ii) an asset of the entity;

just before it becomes a subsidiary member of the group.

Object

701-35(3)    
The object of this section is to ensure that there is no income tax consequence for the entity in respect of the asset.

Note:

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

Setting value of trading stock at tax-neutral amount

701-35(4)    

If paragraph (2)(a) applies, the *value of the *trading stock at the end of the income year that ends, or, if section 701-30 applies, of the income year that is taken by subsection (3) of that section to end, when the entity becomes a *subsidiary member is taken to be equal to:

(a) if the asset was trading stock of the entity at the start of the income year - 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 entity 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 entity 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

701-35(5)    

If paragraph (2)(b) applies, the *value of the *registered emissions unit at the end of the income year that ends, or, if section 701-30 applies, of the income year that is taken by subsection (3) of that section to end, when the entity becomes a *subsidiary member is taken to be equal to:

(a) if the unit was *held by the joining entity at the start of the income year - the value of the unit at the start of the income year; or

(b) otherwise - the expenditure incurred by the joining entity in becoming the holder of the unit.

Note:

See also section 701A-7 of the Income Tax (Transitional Provisions) Act 1997 .