Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 701 - Core rules  

Entity rules  

SECTION 701-30   Where entity not subsidiary member for whole of income year  

Object

701-30(1)    
The object of this section is to provide for a method of working out how the entity core rules apply to the entity for periods in the income year when the entity is not part of the group. The method involves treating each period separately with no netting off between them.

When section has effect

701-30(2)    
This section has effect for the entity core purposes if:

(a) the entity is a ^* subsidiary member of the group for some but not all of an income year; and

(b) there are one or more periods in the income year (each of which is a non-membership period ) during which the entity is not a subsidiary member of any ^* consolidated group.

Tax position of each non-membership period to be worked out

701-30(3)    

For every non-membership period, work out the entity ' s taxable income (if any) for the period, the income tax (if any) payable on that taxable income and the entity ' s loss (if any) (a non-membership period loss ) of each ^* sort for the period. Work them out:

(a) as if the start and end of the period were the start and end of the income year; and

(b) ignoring the operation of this section in relation to each other non-membership period (if any); and

(c) so that each relevant item is either:

(i) allocated to only one of the non-membership periods or to a period that is all or part of the rest of the income year; or

(ii) apportioned among such periods (for example, by Subdivision 716-A (see note to this subsection)).

Note:

Other provisions of this Part are to be applied in working out the taxable income or loss, for example:

• section 701-40 (Exit history rule); and

• Subdivision 716-A (about assessable income and deductions spread over several membership or non-membership periods); and

• section 716-850 (about grossing up threshold amounts for periods of less than 365 days).

Subdivision 716 also affects the tax position of the head company of a group of which the entity has been a subsidiary member for some but not all of the income year.

701-30(3A)    

For the purposes of working out the entity ' s taxable income (if any) for the non-membership period, determine:

(a) whether the entity can ^* utilise a loss of any ^* sort transferred to the entity in the period; and

(b) if the period started at the start of the income year - whether the entity can utilise a loss of any sort:

(i) made by the entity, without a transfer, for an earlier income year; or

(ii) transferred to the entity in an earlier income year;

as if the time just after the end of the period were the end of the income year and the entity carried on at that time the same business that it carried on just before that time. Paragraph (3)(a) has effect subject to this subsection.

Note:

This means that things that happen in relation to the entity at the time it becomes a subsidiary member of the group are taken into account in determining whether the entity can utilise such a loss to affect its taxable income for the non-membership period.

Income tax for the financial year

701-30(4)    
The entity ' s income tax (if any) for the ^* financial year concerned is the total of every amount of income tax worked out for the entity under subsection (3).

Taxable income for the income year

701-30(5)    
The entity ' s taxable income for the income year is the total of every amount of taxable income worked out for the entity under subsection (3).

701-30(6)    
The entity ' s income tax worked out under subsection (4) is taken to be payable on the entity ' s taxable income for the income year worked out under subsection (5), even if the amount of the tax differs from the amount that would be worked out by reference to that taxable income apart from subsection (5).

Loss for the income year

701-30(7)    
The entity has a loss of a particular ^* sort for the income year if and only if it has a non-membership period loss of that sort for the non-membership period (if any) ending at the end of the income year. The amount of the loss for the income year is the amount of the non-membership period loss.

Utilisation and transfer of non-membership period loss

701-30(8)    

However, the provisions of this Act relating to transfer or ^* utilisation of a loss of any ^* sort have effect in relation to a non-membership period loss of that sort for any non-membership period as if the non-membership period loss were the entity ' s loss for an income year that:

(a) started at the start of the period; and

(b) ended at the end of the period.

701-30(9)    
Subsection (8) has effect not only for the entity core purposes, but also (despite subsection (2)) for other purposes.

Excess franking deficit tax offset for the income year

701-30(10)    

For the purposes of applying section 205-70 in relation to an income year after the income year (the current income year ) to which this section applies, the entity has an excess mentioned in paragraph 205-70(1)(c) (about excess franking deficit tax offsets) for the current income year only if it has such an excess for the non-membership period (if any) ending at the end of the current income year. The amount of the excess for the current income year is the amount of the excess for the non-membership period.