Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 715 - Interactions between this Part and other areas of the income tax law  

Subdivision 715-J - Entry history rule and choices  

Choices head company can make ignoring entry history rule to override inconsistencies

SECTION 715-665   Head company ' s choice to override inconsistency  

Application

715-665(1)    

This section has effect if:

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

(b) for each of the following entities, the question whether the entity had made a choice (however described) under a provision (the choice provision ) listed in the table was relevant to working out the entity ' s liability (if any) for income tax, or the entity ' s loss (if any) of a particular ^* sort, calculated by reference to an income year starting before the joining time:

(i) the joining entity;

(ii) another entity that was a ^* member of the group at the joining time; and

(c) there was an inconsistency because, just before the joining time, such a choice had effect for one of the entities but not for the other.

List
Item	Provision	Subject of provision
1	Section 148 of the Income Tax Assessment Act 1936	Reinsurance with non-residents
1A	section 230-210 , 230-255 , 230-315 or 230-395	Choice about treatment of gains and losses from *Division 230 financial arrangement
2	Section 775-80	Choosing not to have sections 775-70 and 775-75 apply to deal with *forex realisation gains and *forex realisation losses
3	A provision that:	Choice about a matter described in the regulations
	(a)	provides for a choice (however described); and
	(b)	is a provision of regulations made for the purposes of this Act, other than this item; and
	(c)	is prescribed by regulations made for the purposes of this item

Note 1:

The other entity mentioned in subparagraph (1)(b)(ii) may have become a member of the group either before or at the joining time. That other entity may be either another subsidiary member of the group or the head company of the group.

Note 2:

An election by an entity under section 148 of the Income Tax Assessment Act 1936 is an example of a choice under that provision (even though that section does not call the election a choice) because the entity has chosen to make the election.

Object

715-665(2)    
The main objects of this section are:

(a) to override the inconsistency; and

(b) to displace section 701-5 (Entry history rule), so far as it relates to the inconsistency; and

(c) to allow the ^* head company of the ^* consolidated group to make a choice (however described) under the choice provision.

Overriding the inconsistency

715-665(3)    
Neither of these things relating to an entity that becomes a ^* member of the ^* consolidated group at the joining time has effect for the head company core purposes set out in section 701-1 (Single entity rule):

(a) a choice (however described) by the entity having effect under the choice provision before that time;

(b) the absence of such a choice.

Note:

This affects all entities that become members of the consolidated group at the joining time, including the head company if the joining time is the time at which the group comes into existence.

715-665(4)    
However, if the choice provision is section 148 of the Income Tax Assessment Act 1936 (Reinsurance with non-residents):

(a) subsection (3) of this section does not apply in relation to reinsurance under contracts made before the joining time (but does apply in relation to reinsurance under contracts made at or after that time); and

(b) that section applies for the head company core purposes in relation to reinsurance under a contract made before the joining time by an entity (the contracting party ) that became a ^* member of the ^* consolidated group at or before the joining time:

(i) as if the ^* head company of the consolidated group had made an election under that section, if the contracting party had made such an election that was relevant to working out the party ' s liability (if any) for income tax, or the party ' s ^* tax loss (if any), for an income year in connection with the contract; or

(ii) as if the head company had not made such an election, if the contracting party had not made such an election that was relevant to working out the party ' s liability (if any) for income tax, or the party ' s tax loss (if any), for an income year in connection with the contract.

Choice replacing inconsistency

715-665(5)    
If:

(a) the question whether the ^* head company of the ^* consolidated group has made a choice (however described) under the choice provision is relevant for the head company core purposes set out in section 701-1 (Single entity rule); and

(b) there is a limit (outside this section) on the period within which the head company may make such a choice;

the head company has until the later of these times to make such a choice:

(c) the last time the head company may make the choice (apart from this subsection);

(d) the end of 90 days after the Commissioner is given notice under Division 703 that the joining entity has become a ^* member of the group or, if the Commissioner allows a later time for the purposes of this paragraph, that later time.

Note:

If the joining time is when the consolidated group is formed, the Commissioner should be given notice under Division 703 that the joining entity has become a member of the group when the approved form of the choice to form the group is given to the Commissioner.

When head company ' s choice starts to have effect

715-665(6)    
If the ^* head company of the ^* consolidated group makes a choice (however described) under the choice provision as a result of becoming able to make the choice because the joining entity became a ^* member of the group, the choice starts to have effect:

(a) at the joining time; or

(b) if the choice relates (explicitly or implicitly) to one or more whole income years - for the income year in which the joining time occurs.

715-665(7)    
However, if:

(a) the ^* head company of the ^* consolidated group makes a choice as described in subsection (6); and

(b) the choice is an election under section 148 of the Income Tax Assessment Act 1936 (Reinsurance with non-residents);

the election has effect only for the purposes of that section applying in relation to reinsurance under contracts made after the joining time and in an income year for which the election applies under that section.

Note:

Subsection (4) explains how section 148 of the Income Tax Assessment Act 1936 applies in relation to reinsurance under contracts made before the joining time.

Relationship with other provisions

715-665(8)    
Section 701-5 (Entry history rule) and the choice provision have effect subject to this section.