Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 705 - Tax cost setting amount for assets where entities become subsidiary members of consolidated groups  

Subdivision 705-A - Basic case: a single entity joining an existing consolidated group  

Tax cost setting amount for assets that joining entity brings into joined group

SECTION 705-56   Modification for tax cost setting in relation to leases  

Application of this section

705-56(1)    

This section applies if, just before the joining time, the joining entity is the lessor or lessee under a lease of a *depreciating asset (the underlying asset ) to which Division 40 applies.

Joining entity is lessor

705-56(2)    
If the joining entity is the lessor under the lease and ^* holds the underlying asset just before the joining time, subsection (5) applies, in relation to the joining entity, to the asset that is the joining entity ' s right to receive lease payments.

Note:

In this situation, the underlying asset will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701-10 ).

705-56(3)    
If the joining entity is the lessor under the lease and does not ^* hold the underlying asset just before the joining time:

(a)    subsection (5) applies to the underlying asset in relation to the joining entity; and

(b)    for the purposes of this Division:

(i) the joining entity ' s right to receive lease payments is taken to be a ^* retained cost base asset; and

(ii) the ^* tax cost setting amount of that retained cost base asset is taken to be equal to its ^* market value just before the joining time.

Note:

In this situation, the asset that is the joining entity ' s right to receive lease payments will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701-10 ).

Joining entity is lessee

705-56(4)    
If the joining entity is the lessee under the lease and does not ^* hold the underlying asset just before the joining time:

(a)    subsection (5) applies to the underlying asset in relation to the joining entity; and

(b)    the liability that is the lessee ' s obligation to make lease payments is not taken into account under subsection 705-70(1) .

Note:

If the joining entity is the lessee under the lease and holds the underlying asset just before the joining time:

(a) the underlying asset will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701-10 ); and

(b) the liability that is the lessee ' s obligation to make lease payments is taken into account under subsection 705-70(1) .

Tax cost of certain assets set at nil

705-56(5)    
If this subsection applies to an asset, in relation to the joining entity:

(a)    the asset is not taken into account under paragraph 705-35(1)(b) or (c) ; and

(b)    the asset ' s ^* tax cost setting amount is taken to be nil.