Tax Laws Amendment (2012 Measures No. 2) Act 2012 (99 of 2012)

Schedule 3  

Part 1   Pre rules

Income Tax Assessment Act 1997

9   Section 716-405

Repeal the section, substitute:

716-405 Tax cost setting and rights to future income - deduction

(1) This section applies if:

(a) an entity (the joining entity ) became a subsidiary member of a *consolidated group at a time (the joining time ); and

(b) subsection 701-55(5C) applies in relation to the asset at the joining time.

Note: Subsection 701-55(5C) deals with assets covered by section 716-410 (Rights to amounts that are expected to be included in assessable income after joining time).

(2) An entity qualified for a deduction under subsection (5) for the asset for an income year ending after the joining time:

(a) if the entity is the *head company of the group and the entity expects that a recoverable debt will arise in respect of the work, goods or services mentioned in subsection 701-63(6) in relation to the asset within 12 months after the joining time - can deduct, for that income year, the *unexpended tax cost setting amount for the asset; or

(b) if paragraph (a) does not apply and one or more recoverable debts arise, in that income year, in respect of the work, goods or services mentioned in subsection 701-63(6) in relation to the asset - can deduct, for that income year, the lesser of:

(i) the unexpended tax cost setting amount for the asset for that income year; and

(ii) the total of those recoverable debts; or

(c) if paragraphs (a) and (b) do not apply - cannot deduct an amount under this section in respect of the asset for that income year.

(4) The unexpended tax cost setting amount for the asset for an income year is the *tax cost setting amount for the asset, reduced by:

(a) the amounts (if any) of all deductions under this section in respect of the asset for previous income years ending after the joining time; and

(b) in determining the amount of a deduction under this section in respect of the asset for that income year for an entity that ceased to be a *subsidiary member of the group in that income year - the amount (if any) that the *head company of the group can deduct under this section in respect of the asset for that income year.

(5) An entity is qualified for a deduction under this subsection for an income year for the asset if:

(a) the entity:

(i) is the *head company of the group; and

(ii) held the asset at a time in that income year (whether or not because of the operation of subsection 701-1(1) (the single entity rule)); or

(b) the entity:

(i) held the asset at a time in that income year; and

(ii) ceased to be a *subsidiary member of the group in that income year or an earlier income year.

(6) An amount deducted under this section:

(a) is not to be deducted under any other provision of this Act; and

(b) is not to be taken into account in determining an amount that is included in the assessable income of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(c) is not to be taken into account in determining an amount of a deduction of any entity qualified for a deduction under subsection (5) for any income year for the asset; and

(d) despite paragraphs (b) and (c), is taken never to have been included in any of the elements of the *cost base of the asset.