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-K - Exit history rule and choices  

Choices leaving entity can make ignoring exit history rule to overcome inconsistencies

SECTION 715-705   Choices leaving entity can make ignoring exit history rule to overcome inconsistencies  

Application

715-705(1)    
This section has effect if an entity ceases to be a ^* subsidiary member of a ^* consolidated group at a time (the leaving time ) and there is an inconsistency because either:

(a) both of these conditions are met:

(i) a choice (however described) under a provision (the choice provision ) listed in the table in subsection 715-665(1) by the entity had effect just before the entity became a ^* member of the group;

(ii) there was not such a choice by the ^* head company of the group having effect just before the leaving time; or

(b) both of these conditions are met:

(i) there was not a choice (however described) under the choice provision by the entity having effect just before the entity became a member of the group;

(ii) such a choice by the head company had effect just before the leaving time.

Note:

An election by the entity or head company under the choice provision is an example of a choice under that provision (even though the provision does not call the election a choice) because the entity or company has chosen to make the election.

Object

715-705(2)    
The main objects of this section are:

(a) to displace section 701-40 (Exit history rule), so far as it relates to the inconsistency; and

(b) to allow the entity to make a choice (however described) under the choice provision with effect after the leaving time.

Displacing the exit history rule

715-705(3)    
For the entity core purposes set out in section 701-1 (Single entity rule) relating to income years ending after the leaving time, ignore a choice (however described) made by the ^* head company of the ^* consolidated group under the choice provision or the absence of such a choice.

715-705(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 leaving time (but does apply in relation to reinsurance under contracts made at or after that time); and

(b) that section applies, for the entity core purposes relating to income years ending after the leaving time, in relation to reinsurance under a contract made before the leaving time:

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

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

Note:

In some cases, subsection 715-665(4) treats the head company of a consolidated group as having made an election under section 148 of the Income Tax Assessment Act 1936 in relation to reinsurance under contracts made before an entity becomes a member of the group.

Fresh choice by the entity

715-705(5)    
The entity may make a choice (however described) under the choice provision if the question whether the entity has made such a choice is relevant to working out the entity ' s liability (if any) for income tax, or loss (if any) of a particular ^* sort, calculated by reference to an income year ending after the leaving time.

Extension of time for fresh choice by the entity

715-705(6)    
If there is a time limit (apart from this subsection) on the entity making such a choice, the entity has until the later of these times to make the choice:

(a) the last time it may make the choice under the choice provision (apart from this section);

(b) the end of 90 days after the leaving time or, if the Commissioner allows a later time for the purposes of this paragraph, that later time.

Start of effect of choice

715-705(7)    
If the entity makes a choice because of this section, the choice starts to have effect:

(a) at the leaving time; or

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

715-705(8)    
However, if:

(a) the entity makes a choice because of this section; 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 at or after the leaving 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

715-705(9)    
Section 701-40 (Exit history rule) and the choice provision have effect subject to this section.