New Business Tax System (Consolidation and Other Measures) Act 2003 (16 of 2003)

Schedule 1   Consolidation: amendments of various cost base provisions

Part 1   Adjustments to restrict step 4 reduction in allocable cost amount in Subdivision 705-B and 705-D cases

Income Tax Assessment Act 1997

2   Section 705-230

Repeal the section, substitute:

705-230 Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests

Object

(1) The object of this section is to ensure that, in working out the group's *allocable cost amount for the linked entities, the reduction under step 4 in the table in section 705-60 (about pre-formation time distributions out of certain profits) is made only for profits that have been effectively distributed to the *head company in respect of its direct *membership interests in the entities. This ensures consistency with the ordering rule in section 705-225.

When section applies

(2) This section applies to a distribution to the extent that the following conditions are satisfied:

(a) the distribution is made by a linked entity;

(b) in working out the group's *allocable cost amount for the linked entity there would, apart from this section, be a reduction under step 4 in the table in section 705-60 for the distribution.

Step 4 reduction only if subject distribution is made to head company

(3) There is no reduction as mentioned in subsection (2) for the distribution unless it is made to the *head company of the group.