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

Schedule 5   Consolidation

Part 3   Pre-CGT proportions

Income Tax Assessment Act 1997

30   Section 711-70

Repeal the section, substitute:

711-70 Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711-65 - application of Division 149 to head company

(1) This section applies if:

(a) the leaving entity held assets at the time it became a *subsidiary member of the old group (disregarding subsection 701-1(1) (the single entity rule)); and

(b) some or all of the assets:

(i) stopped being *pre-CGT assets under Division 149 at a time (the Division 149 time ) when the *head company of the group held them under subsection 701-1(1) (the single entity rule); or

(ii) would have stopped being pre-CGT assets under Division 149 at a time (also the Division 149 time ) when the head company of the group held them under subsection 701-1(1) (the single entity rule) if they had been pre-CGT assets just before that time; and

(c) the leaving entity was a subsidiary member of the group at that time.

(2) The *pre-CGT proportion of the leaving entity at the leaving time is taken to be nil.

(3) Adjust the old group's *allocable cost amount for the leaving entity as follows:

(a) if the amount under subsection (4) exceeds the amount under subsection (6) - increase the allocable cost amount by the excess;

(b) if the amount under subsection (4) falls short of the amount under subsection (6) - reduce the allocable cost amount by the shortfall.

(4) Subject to subsection (5), the amount under this subsection is:

(a) if Subdivision 705-A applied in relation to the leaving entity at the time it became a *subsidiary member of the old group - the total of the amounts that were taken into account under subsection 705-65(1) for *membership interests in the leaving entity at that time; or

(b) otherwise - assuming that Subdivision 705-A had applied in relation to the leaving entity at the time it became a subsidiary member of the old group, the total of the amounts that would have been taken into account under subsection 705-65(1) for membership interests in the leaving entity at that time.

(5) For the purposes of subsection (4), if a *membership interest in the leaving entity was covered under paragraph 705-125(2)(a) (pre-CGT interests) when it became a *subsidiary member of the old group, treat the amount that was taken into account for the membership interest under subsection 705-65(1) as the interest's *market value just after the Division 149 time.

(6) The amount under this subsection is the old group's *allocable cost amount for the leaving entity, worked out on the assumption that the leaving entity ceased to be a *subsidiary member of the old group just after the Division 149 time.

711-75 Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711-65 - application of CGT event K6

(1) This section applies if the leaving entity ceases to be a *subsidiary member of the old group because of a situation giving rise to *CGT event A1, C2, E1, E2 or E8 in relation to one or more *membership interests in the leaving entity.

(2) For the purposes of applying subsections 104-230(2) and (8) in relation to those *membership interests:

(a) disregard subsection 701-1(1) (the single entity rule) in working out the *net value of the leaving entity; and

(b) treat the reference in subsection 104-230(2) to "Just before the other event happened" as a reference to "Just before the leaving time".

Note 1: The single entity rule will continue to apply in determining whether the property mentioned in subsection 104-230(2) for the leaving entity was acquired on or after 20 September 1985.

Note 2: However, in a case of multiple exit from a consolidated group (see section 711-55), the property mentioned in subsection 104-230(2) for the leaving entity may include membership interests in another entity leaving the group at the leaving time. To determine which of those membership interests were acquired on or after 20 September 1985 for the purposes of applying subsection 104-230(2) to the leaving entity, see section 711-65.

(3) In determining the sum of the *cost bases of the property mentioned in subsection 104-230(6), treat the cost base of an asset that is included in that property as:

(a) if the asset has its *tax cost set at the leaving time under section 701-50 - its *tax cost setting amount; or

(b) if the *terminating value of the asset is taken into account in working out the step 1 amount under section 711-25 for the leaving entity - that terminating value; or

(c) if the asset is taken into account in working out the step 3 amount under section 711-40 for the leaving entity - the value of the asset that is so taken into account.