Tax Laws Amendment (2010 Measures No. 1) Act 2010 (56 of 2010)

Schedule 5   Consolidation

Part 1   Use of the tax cost setting amount

1   Division 1 - Main amendments

Income Tax Assessment Act 1997

3   Subsection 701-55(6)

Repeal the subsection, substitute:

Rights to future amounts to be included in assessable income of head company

(5C) If section 716-410 (rights to future amounts that are expected to be included in assessable income) covers the asset at the particular time, the expression means that section 716-405 may apply in relation to the asset after the particular time.

Other provisions

(6) If any provision of this Act that is not mentioned above is to apply in relation to the asset by including an amount in assessable income, or by allowing an amount as a deduction, in a way that brings into account (directly or indirectly) any of the following amounts:

(a) the cost of the asset;

(b) outgoings incurred, or amounts paid, in respect of the asset;

(c) expenditure in respect of the asset;

(d) an amount of a similar kind in respect of the asset;

the expression means that the provision applies, for the purpose of determining the amount included in assessable income or the amount of the deduction, as if the cost, outgoing, expenditure or other amount had been incurred or paid to acquire the asset at the particular time for an amount equal to its tax cost setting amount.

Note 1: This subsection modifies the application of the provision only for the purpose of determining the amount included in assessable income or the amount of the deduction. Therefore:

(a) the acquisition mentioned in this subsection is recognised only for that purpose; and

(b) apart from the things mentioned in subsection 701-56(1), that acquisition does not affect the operation of section 701-5 (the entry history rule) in relation to the asset for other purposes.

Note 2: For specific clarifications of the operation of this subsection in relation to bad debts, see Subdivision 716-S.

701-56 Setting the tax cost of an asset - subsection 701-55(6)

Entry history rule

(1) To avoid doubt, if subsection 701-55(6) applies in relation to an asset at the time (the joining time ) an entity (the joining entity ) became a *subsidiary member of a *consolidated group, the things that are taken to have happened in relation to the *head company of the group under section 701-5 (entry history rule) do not include:

(a) the cost, outgoing, expenditure or other amount incurred or paid to acquire the asset by the joining entity; and

(b) whether the cost, outgoing, expenditure or other amount incurred or paid by the joining entity to acquire the asset has been deducted by the joining entity before the joining time.

Trading stock

(2) Subsection 701-55(6) does not apply in relation to an asset if it is *trading stock.

Certain depreciating assets etc.

(3) Subsection 701-55(6) does not apply in relation to an asset if any of the following provisions are to apply in relation to the asset:

(a) Subdivision 40-F (Primary production depreciating assets);

(b) Subdivision 40-G (Capital expenditure of primary producers and other landholders);

(c) Subdivision 40-H (Capital expenditure that is immediately deductible);

(d) Subdivision 40-I (Capital expenditure that is deductible over time), other than section 40-880 (Business related costs);

(e) Subdivision 40-J (Capital expenditure for the establishment of trees in carbon sink forests);

(f) Division 41 (Additional deduction for certain new business investment);

(g) Division 43 (Deductions for capital works).