Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 709 - Other rules applying when entities become subsidiary members etc.  

Subdivision 709-B - Imputation issues  

Operative provisions

SECTION 709-175   Head company is former exempting entity  

709-175(1)    
Subsection (2) operates if:

(a) the ^* head company of a ^* consolidated group is a ^* former exempting entity; and

(b) a ^* corporate tax entity becomes a ^* subsidiary member of the group at a time (also the joining time ); and

(c) the entity is an ^* exempting entity at the joining time.

709-175(2)    
These rules apply to the ^* consolidated group.

Rules applying to *consolidated group
Item	Rule
1	There is no change to the status of the *head company
2	If the subsidiary member ' s *franking account has a *franking surplus at the joining time:
	(a)	a debit equal to that surplus arises in that account at the joining time; and
	(b)	a credit equal to that surplus arises in the *exempting account of the *head company at the joining time
3	Subsection 709-60(2) (about franking surplus) does not apply to the *subsidiary member

Note 1:

If the subsidiary ' s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709-60(3) .

Note 2:

The subsidiary ' s franking account does not operate while it is a member of the group: see section 709-65 .

709-175(3)    
Subsection (4) operates if:

(a) the ^* head company of a ^* consolidated group is a ^* former exempting entity; and

(b) a ^* corporate tax entity becomes a ^* subsidiary member of the group at a time (also the joining time ); and

(c) the entity is a ^* former exempting entity at the joining time.

709-175(4)    
These rules apply to the ^* consolidated group.

Rules applying to *consolidated group
Item	Rule
1	There is no change to the status of the *head company
2	If the *subsidiary member ' s *exempting account has an *exempting surplus at the joining time:
	(a)	a debit equal to that surplus arises in that account at the joining time; and
	(b)	a credit equal to that surplus arises in the exempting account of the *head company at the joining time
3	If the *subsidiary member ' s *exempting account has an *exempting deficit at the joining time:
	(a)	a credit equal to that deficit arises in that account at the joining time; and
	(b)	a debit equal to that deficit arises in the subsidiary ' s *franking account just before the joining time
4	The *subsidiary member ' s *exempting account does not operate during the period:
	(a)	starting just after the joining time; and
	(b)	ending when the entity ceases to be a subsidiary member of the group

Note 1:

If the subsidiary ' s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709-60(3) . This deficit may be increased by item 3 in the table in subsection (4).

Note 2:

The subsidiary ' s franking account does not operate while it is a member of the group: see section 709-65 .

709-175(5)    
There is no change to the status of the ^* head company of a ^* consolidated group if:

(a) the head company is a ^* former exempting entity; and

(b) a ^* corporate tax entity becomes a ^* subsidiary member of the group; and

(c) the entity is neither an ^* exempting entity nor a former exempting entity at the joining time.

Note 1:

If the subsidiary ' s franking account is in surplus, that surplus will be transferred to the head company ' s franking account: see subsection 709-60(2) .

Note 2:

If the subsidiary ' s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709-60(3) .

Note 3:

The subsidiary ' s franking account does not operate while it is a member of the group: see section 709-65 .