Income Tax Assessment Act 1997

CHAPTER 4 - INTERNATIONAL ASPECTS OF INCOME TAX  

PART 4-5 - GENERAL  

Division 820 - Thin capitalisation rules  

Subdivision 820-FA - How the thin capitalisation rules apply to consolidated groups and MEC groups  

Operative provisions

SECTION 820-590   Treatment of FRT disallowed amounts - joining case  

820-590(1)    
This section applies if:

(a)    an entity (the joining entity ) becomes a * member of a * consolidated group (the joined group ) at a time (the joining time ) in an income year (the joining year ); and

(b)    the joining entity had a * FRT disallowed amount for an income year ending before the joining time.

820-590(2)    
Subject to subsection (4) , the * FRT disallowed amount is transferred at the joining time from the joining entity to the * head company of the joined group (even if they are the same entity).

820-590(3)    
To avoid doubt, the result of the transfer under subsection (2) is that the * head company of the joined group has the * FRT disallowed amount for the income year mentioned in paragraph (1)(b) .

820-590(4)    
The * FRT disallowed amount is transferred under subsection (2) only to the extent (if any) that the FRT disallowed amount could have been applied by the joining entity under paragraph 820-56(2)(b) in respect of an income year (the trial year ) consisting of the period described in subsection (5) if:

(a)    at the joining time, the joining entity had not become a * member of the joined group (but had been a * wholly-owned subsidiary of the * head company if the joining entity is not the head company); and

(b)    the amount applied by the joining entity under paragraph 820-56(2)(b) in respect of the trial year were not limited by the joining entity ' s excess mentioned in that paragraph in respect of the trial year.

820-590(5)    
For the purposes of subsection (4) , the period is the period:

(a)    starting at the latest of the following times:

(i) the time 12 months before the joining time;

(ii) the time the joining entity came into existence;

(iii) the time the joining entity last ceased to be a * subsidiary member of a * consolidated group, if the joining entity had been a member of a consolidated group before the joining time but was not a * member of a consolidated group just before the joining time; and

(b)    ending just after the joining time.

820-590(6)    
When working out, for the purposes of subsection (4) , whether the joining entity carried on, throughout the * trial year (or a period including the trial year):

(a)    the same business as the business it carried on at a particular time; or

(b)    a similar business to the business it carried on at that time;

assume that the entity carried on at and just after the joining time the same business that it carried on just before the joining time.

820-590(7)    
If the * FRT disallowed amount was for an income year all or part of which occurs in the trial year, the transfer of the FRT disallowed amount under subsection (2) is not prevented by the fact that the FRT disallowed amount was for that income year.

820-590(8)    
If, apart from this subsection, the * head company of the joined group would have 2 or more * FRT disallowed amounts (the transferred FRT disallowed amounts ) for a particular income year as a result of the operation of subsection (2) :

(a)    treat it as having only one FRT disallowed amount for the income year; and

(b)    treat that one FRT disallowed amount as being equal to the sum of the transferred FRT disallowed amounts.