Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 104 - CGT events  

Subdivision 104-L - Consolidated groups and MEC groups  

SECTION 104-525   Error in calculation of tax cost setting amount for joining entity ' s assets: CGT event L6  

104-525(1)    
CGT event L6 happens if:

(a) you are the *head company of a *consolidated group or a *MEC group; and

(b) the conditions in section 705-315 (about errors in tax cost setting amounts) are satisfied for a *subsidiary member of the group; and

(c) you have a *net overstated amount or a *net understated amount for the subsidiary member.

104-525(2)    
The time of the event is the start of the income year in which the Commissioner becomes aware of the errors.

104-525(3)    
You work out whether you have a net overstated amount or net understated amount using this table:

Meaning of net overstated amount and net understated amount
Item	In this situation:	There is this result:
1	There are one or more overstated amounts under section 705-315 for the *subsidiary member but no understated amount under that section for the subsidiary member	There is a net overstated amount . It is the overstated amount, or the sum of the overstated amounts.
2	There are one or more understated amounts under section 705-315 for the *subsidiary member but no overstated amount under that section for the subsidiary member	There is a net understated amount . It is the understated amount, or the sum of the understated amounts.
3	There are both one or more overstated amounts and one or more understated amounts under section 705-315 for the *subsidiary member and the sum of the overstated amounts exceeds the sum of the understated amounts	There is a net overstated amount . It is the difference between those sums
4	There are both one or more overstated amounts and one or more understated amounts under section 705-315 for the *subsidiary member and the sum of the overstated amounts is less than the sum of the understated amounts	There is a net understated amount . It is the difference between those sums

104-525(4)    
If the time when the Commissioner becomes aware of the errors is within the period within which the Commissioner may amend all of the assessments necessary to correct the errors, then, for the head company core purposes mentioned in subsection 701-1(2) :

(a) if you have a *net overstated amount - you make a capital gain equal to that amount; or

(b) if you have a *net understated amount - you make a capital loss equal to that amount.

104-525(5)    
If the time when the Commissioner becomes aware of the errors is not within that period, then, for the head company core purposes mentioned in subsection 701-1(2) :

(a) if you have a *net overstated amount - you make a capital gain of the amount worked out under subsection (6); or

(b) if you have a *net understated amount - you make a capital loss of the amount worked out under subsection (6).

104-525(6)    

The amount of the *capital gain or *capital loss is worked out as follows:

Stated amount

×

Current asset setting amount Original asset setting amount

where:

current asset setting amount
means the *tax cost setting amount for all assets referred to in subsection 705-315(2) as reset cost base assets that the *head company of the *consolidated group or the *MEC group held continuously from the time when the *subsidiary member joined the group until the start of the head company ' s income year that is the earliest income year for which the Commissioner could amend the head company ' s assessment to correct any of the errors.

original asset setting amount
means the *tax cost setting amount for all assets referred to in subsection 705-315(2) as reset cost base assets that the *subsidiary member held at the time it joined the group.

stated amount
means the *net overstated amount or the *net understated amount, as the case requires.