Taxation Laws Amendment Act (No. 6) 2003 (67 of 2003)
Schedule 3 Consolidation: treatment of linked assets and liabilities
Income Tax Assessment Act 1997
3 After section 705-57
Insert:
705-58 Assets and liabilities not set off against each other
(1) This Part applies separately to each asset and liability even if *accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board, require them to be set off against each other.
(2) This section has effect subject to section 705-59.
705-59 Exception: treatment of linked assets and liabilities
(1) This section applies to each set of *linked assets and liabilities that the joining entity has immediately before the joining time.
(2) One or more assets, and one or more liabilities, that an entity has constitute a set of linked assets and liabilities of the entity if, and only if, in accordance with *accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board:
(a) the total of the one or more assets is to be set off against the total of the one or more liabilities in preparing statements of the entity's financial position; and
(b) the net amount after the set-off is to be recognised in those statements.
(3) If the set consists only of one reset cost base asset for the purposes of section 705-35, and one or more liabilities:
(a) first, work out the total (the available amount ) that, apart from this section and the accounting requirement referred to in subsection (2) of this section, would be taken into account under subsection 705-70(1) (about step 2 in working out the allocable cost amount) for the one or more liabilities; and
(b) next, work out the consequences under this table.
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Treatment of linked assets and liabilities: single reset cost base asset case |
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Item |
If the asset's * market value at the joining time: |
This is the result for the asset: |
This is the result for the one or more liabilities: |
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1 |
is less than or equal to the available amount |
its *tax cost setting amount is that market value (and the asset is not taken into account under paragraph 705-35(1)(c)) |
only the difference (if any) is taken into account under subsection 705-70(1) for the one or more liabilities |
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2 |
is greater than the available amount |
its *tax cost setting amount is: (a) the available amount; plus (b) the amount worked out for the asset under section 705-35 on the basis that the asset's *market value is reduced by the available amount |
the one or more liabilities are not taken into account under subsection 705-70(1) |
Note: Paragraph 705-35(1)(c) allocates the allocable cost amount (as reduced by the tax cost setting amounts of retained cost base assets) among the joining entity's reset cost base assets.
(4) If the set consists only of one or more *retained cost base assets and one or more liabilities, this section does not affect their treatment.
Note: This is because the tax cost setting amount for a retained cost base asset is worked out without regard to the allocable cost amount.
(5) In any other case:
(a) first, work out the available amount under paragraph (3)(a); and
(b) next, work out the consequences under this table.
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Treatment of linked assets and liabilities: all other cases |
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Item |
In this case: |
This is the result for the one or more assets in the set: |
This is the result for the one or more liabilities in the set: |
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1 |
there is no *retained cost base asset in the set, and the total of the respective *market values (at the joining time) of the assets in the set is less than or equal to the available amount |
the *tax cost setting amount of each of the assets is that asset's market value at the joining time (and none of them is taken into account under paragraph 705-35(1)(c)) |
only the difference (if any) is taken into account under subsection 705-70(1) |
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2 |
there is no *retained cost base asset in the set, and the total of the respective *market values (at the joining time) of the assets in the set is greater than the available amount |
the *tax cost setting amount of each of the assets is the sum of: (a) a share of the available amount that is proportionate to that asset's market value at the joining time; and (b) the amount worked out for the asset under section 705-35 on the basis that the asset's market value at the joining time is reduced by the share referred to in paragraph (a) |
none is taken into account under subsection 705-70(1) |
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3 |
there are one or more *retained cost base assets in the set, and the total of their respective *tax cost setting amounts is greater than or equal to the available amount |
this section does not affect the treatment of the one or more assets in the set |
this section does not affect the treatment of the one or more liabilities in the set |
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4 |
there are one or more *retained cost base assets in the set, and the total (the retained cost base total ) of their respective *tax cost setting amounts is less than the available amount |
the one or more retained cost base assets are not taken into account under paragraph 705-35(1)(b); the *tax cost setting amount of each remaining asset in the set is worked out by applying item 1 or 2, as appropriate, of this table on the basis that: (a) the available amount is reduced by the retained cost base total; and (b) the one or more retained cost base assets are otherwise ignored |
the available amount is reduced by the retained cost base total |
Note 1: Paragraph 705-35(1)(b) reduces the allocable cost amount by the tax cost setting amounts of retained cost base assets. Item 4 of the table in this subsection excludes the application of paragraph 705-35(1)(b) to retained cost base assets in the set; this in turn may affect the application of CGT event L3.
Note 2: Paragraph 705-35(1)(c) then allocates the reduced allocable cost amount among the joining entity's reset cost base assets.
(6) In applying subsections (3), (4) and (5) of this section, disregard an asset covered by subsection 705-35(2) (assets that do not have a tax cost setting amount).
(7) This section does not affect the application of sections 705-40, 705-45 and 705-50 (which adjust the tax cost setting amount for a reset cost base asset).