Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 705 - Tax cost setting amount for assets where entities become subsidiary members of consolidated groups  

Subdivision 705-A - Basic case: a single entity joining an existing consolidated group  

How to work out the allocable cost amount

SECTION 705-115   If head company becomes entitled to certain deductions - step 7 in working out allocable cost amount  

705-115(1)    

For the purposes of step 7 in the table in section 705-60 , the step 7 amount is worked out using the following formula:

Owned deductions

+   [ Acquired deductions × *Corporate tax rate ]

where:

acquired deductions
means all deductions covered by subsection (2) that are not owned deductions.

owned deductions
means the sum of all deductions for which the following requirements are satisfied:

(a) the deduction is covered by subsection (2);

(b) assuming the expenditure that gave rise to the deduction were instead a profit that accrued at the time the expenditure was incurred, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time (see subsection 705-90(7) ).

705-115(2)    
This subsection covers any deduction to which the ^* head company becomes entitled under section 701-5 as a result of the joining entity becoming a ^* subsidiary member of the joined group, other than a deduction for expenditure:

(a) that is, forms part of or reduces, the cost of an asset of the joining entity that becomes an asset of the head company because subsection 701-1(1) (the single entity rule) applies; or

(b) to which section 110-40 (about expenditure on assets acquired before 7.30 pm on 13 May 1997) applies; or

(c) to the extent that the expenditure reduced the undistributed profits comprising the step 3 amount in the table in section 705-60 .

705-115(3)    

Subsection (2) does not cover a deduction under section 43-15 (which relates to *undeducted construction expenditure) if the joining entity *acquired the asset to which the deduction relates at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997.