New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 (90 of 2002)

Schedule 4   Consolidation: reset cost base assets held on revenue account

Income Tax Assessment Act 1997

1   Section 705-40

Repeal the section, substitute:

705-40 Tax cost setting amount for reset cost base assets held on revenue account

(1) The*tax cost setting amount for a reset cost base asset that is*trading stock, a*depreciating asset or a*revenue asset must not exceed the greater of:

(a) the asset's*market value; and

(b) the joining entity's*terminating value for the asset.

(2) If subsection (1)reduces the asset's*tax cost setting amount, the amount of the reduction is allocated among the other reset cost base assets (including other*trading stock,*depreciating assets and*revenue assets) other than excluded assets, so as toincrease their tax cost setting amounts, in accordance with the principles set out in subsection (3).

Note: If any of the amount of the reduction cannot be allocated, it is instead treated as a capital loss of the head company.

(3) These are the principles:

(a) the allocation is to be in proportion to the*market values of the assets;

(b) the amount allocated to an item of*trading stock, to a*depreciating asset or to a*revenue asset must not cause its*tax cost setting amount to contravene subsection (1);

(c) any of the amount that cannot be allocated is to be reallocated, to the maximum extent possible, among the remaining reset cost base assets (other than excluded assets) by applying this subsection a further one or more times.