Treasury Laws Amendment (Income Tax Consolidation Integrity) Act 2018 (14 of 2018)

Schedule 1   Consolidation

Part 6   TOFA

Income Tax Assessment Act 1997

24   After section 715-378

Insert:

715-379 Cost setting on leaving - amount of intragroup liability that is Division 230 financial arrangement

(1) Subsection (2) applies if:

(a) an entity (the leaving entity ) ceases to be a *subsidiary member of a *consolidated group at a time (the leaving time ); and

(b) a thing (the accounting liability ) is, in accordance with *accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board:

(i) a liability of the leaving entity at the leaving time that can or must be recognised in the entity's statement of financial position; or

(ii) a liability of the *head company of the group at the leaving time that can or must be recognised in the head company's statement of financial position; and

(c) because subsection 701-1(1) (the single entity rule) ceases to apply to the leaving entity at the leaving time:

(i) if subparagraph (b)(i) applies - the accounting liability becomes a liability of the leaving entity, and an asset (the corresponding asset ) that consists of the liability becomes an asset of the head company; or

(ii) if subparagraph (b)(ii) applies - the accounting liability becomes a liability of the head company, and an asset (the corresponding asset ) that consists of the liability becomes an asset of the leaving entity; and

(d) the corresponding asset's *tax cost is set at the leaving time under:

(i) if subparagraph (b)(i) applies - section 701-20; or

(ii) if subparagraph (b)(ii) applies - section 701-45; and

(e) the accounting liability is or is part of a *Division 230 financial arrangement.

(2) For the purposes of Division 230 of this Act and Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009:

(a) if subparagraph (1)(b)(i) applies - treat the leaving entity as starting to have the accounting liability at the leaving time for receiving a payment equal to the *tax cost setting amount of the corresponding asset; or

(b) if subparagraph (1)(b)(ii) applies - treat the *head company as starting to have the accounting liability at the leaving time for receiving a payment equal to the tax cost setting amount of the corresponding asset.

Note: The tax cost setting amount of the corresponding asset is determined under sections 701-60 and 701-60A.

715-379A Cost setting on leaving - head company's or leaving entity's right to receive or obligation to provide payment

(1) This section applies in relation to an asset or a liability if:

(a) an entity (the leaving entity ) ceases to be a *subsidiary member of a *consolidated group at a time (the leaving time ); and

(b) because subsection 701-1(1) (the single entity rule) ceases to apply to the leaving entity at the leaving time, the asset or liability becomes the asset or liability of:

(i) the leaving entity; or

(ii) the *head company of the group; and

(c) if subparagraph (b)(i) applies:

(i) in the case of an asset - subsection 701-55(5A) applies in relation to the asset at the leaving time because of section 701-45; or

(ii) in the case of a liability - subsection 715-379(2) applies in relation to the liability at the leaving time; and

(d) if subparagraph (b)(ii) applies:

(i) in the case of an asset - subsection 701-55(5A) applies in relation to the asset at the leaving time because of section 701-20; and

(ii) in the case of a liability - subsection 715-379(2) applies in relation to the liability at the leaving time; and

(e) the asset or liability is or is part of a *Division 230 financial arrangement.

(2) If subparagraph (1)(b)(i) applies:

(a) in the case of an asset - for the purposes of section 230-60, assume that the leaving entity acquired the asset (as mentioned in subsection 701-55(5A)) at the leaving time in return for the leaving entity starting to have an obligation to provide the payment mentioned in that subsection; and

(b) in the case of a liability - for the purposes of section 230-60, assume that the leaving entity started to have the liability at the leaving time in return for the leaving entity starting to have a right to receive the payment mentioned in subsection 715-379(2).

(3) If subparagraph (1)(b)(ii) applies:

(a) in the case of an asset - for the purposes of section 230-60, assume that the head company acquired the asset (as mentioned in subsection 701-55(5A)) at the leaving time in return for the head company starting to have an obligation to provide the payment mentioned in that subsection; and

(b) in the case of a liability - for the purposes of section 230-60, assume that the head company started to have the liability at the leaving time in return for the head company starting to have a right to receive the payment mentioned in subsection 715-379(2).