Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 701 - Core rules  

Entity rules  

SECTION 701-45   Cost of assets consisting of liabilities owed to entity by members of the group  

701-45(1)    
If the entity ceases to be a ^* subsidiary member of the group, this section has effect for the entity 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

701-45(2)    
This section applies in relation to an asset if:

(a) it 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

(b) the asset consists of a liability owed to the entity by a ^* member of the group.

Object

701-45(3)    

The object of this section is to set the cost of the asset to enable income tax consequences for the entity in respect of the asset to be determined.

Note:

In the case of other assets, the fact that the entity inherits their history under section 701-40 when the entity ceases to be a subsidiary member of the group means that the assets would be treated as having the same cost as they would for the head company at that time. However, assets consisting of liabilities do not have such a history because they are only recognised when the entity ceases to be a subsidiary member and the single entity rule ceases to apply.

Setting the asset's tax cost

701-45(4)    

The asset's ^* tax cost is set at the time the entity ceases to be a ^* subsidiary member of the group at the asset's ^* tax cost setting amount.

Note 1:

If section 701-30 (Where entity not subsidiary member for whole of income year) applies, the time the entity ceases to be a subsidiary member will be treated as the start of an income year.

Note 2:

If the entity is a partnership, Subdivision 713-E sets the tax cost of a partner's interest in an asset consisting of a liability that a member of the group owes to the partnership.