Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-90 - CONSOLIDATED GROUPS

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

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Subdivision 705-D - Where multiple entities are linked by membership interests

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Modified application of Subdivision 705-A

SECTION 705-227 Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by linked entities in other linked entities

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Object

705-227(1)
The object of this section is to modify the effect that section 705-93 (step 3A of allocable cost amount) has in accordance with this Subdivision so that it takes account of ^* membership interests that linked entities hold in other linked entities at the time (the linked entity joining time ) when the linked entities become ^* subsidiary members of the group.

Apportionment of step 3A amount among first level interposed entities

705-227(2)

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If:

(a) under section 705-93 , in its application in accordance with this Subdivision, there is a step 3A amount for the purpose of working out the group's ^* allocable cost amount for a particular linked entity (the subject entity ); and

(b) at the linked entity joining time, one or more of the linked entities (the first level entities ) in which the ^* head company holds ^* membership interests are interposed between the head company and the subject entity;

then the step 3A amount is apportioned among the first level entities and the subject entity on the following basis:

(c) each first level entity has the following proportion of the step 3A amount:

*Market value of first level entity's
direct and indirect membership
interests in subject entity
*Market value of all membership
interests in subject entity

where:

market value of all membership interests in subject entity
means the ^* market value, at the linked entity joining time, of all ^* membership interests in the subject entity that are held by entities that become ^* members of the group at that time.

market value of first level entity's direct and indirect membership interests in subject entity
means so much of the *market value of all membership interests in the subject entity (as defined above) as is attributable to ^* membership interests that the first level entity holds directly, or indirectly through other linked entities; and

(d) the subject entity has the remainder of the step 3A amount.

Membership interests in subsidiary members of group

705-227(3)

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In applying section 705-93 for the purposes of this Subdivision, disregard paragraph 705-93(1)(f) if:

(a) the rollover asset mentioned in that section is a *membership interest in an entity that becomes a *subsidiary member at the linked entity joining time; and

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(b) the rollover asset is not held at that time by the entity that becomes the *head company of the group.

Note:

The step 3A amount is worked out under section 705-93 .

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History

S 705-227(3) substituted by No 56 of 2010, s 3 and Sch 5 item 49, applicable on and after 1 July 2002. S 705-227(3) formerly read:

Step 3A amount for assets consisting of membership interests held by linked entities in other linked entities

705-227(3)
If:

(a) before the linked entity joining time:

(i) there was a roll-over under Subdivision 126-B (a Subdivision 126-B roll-over ) in relation to a ^* CGT event that happened in relation to an asset (the roll-over asset ); or

(ii) former section 160ZZO of the Income Tax Assessment Act 1936 applied in relation to a disposal (a section 160ZZO roll-over ) of an asset (also the roll-over asset ); and

(b) the originating company in relation to the Subdivision 126-B roll-over, or the transferor in relation to the section 160ZZO roll-over, was a foreign resident; and

(c) the recipient company in relation to the Subdivision 126-B roll-over, or the transferee in relation to the section 160ZZO roll-over, was an Australian resident and was not the entity that became the ^* head company of the group; and

(d) between the Subdivision 126-B roll-over, or the section 160ZZO roll-over, and the linked entity joining time, no other CGT event happened in relation to the roll-over asset for which there was not a Subdivision 126-B roll-over or a section 160ZZO roll-over; and

(e) the roll-over asset is a ^* membership interest in a linked entity, other than one that is held at that time by the entity that becomes the head company of the group;
then, subject to subsection (5), there is under section 705-93 a step 3A amount for the purpose of working out the group's ^* allocable cost amount for the linked entity (the subject entity ) that holds the roll-over asset at the linked entity joining time.

S 705-227(3) amended by No 101 of 2006 , s 3 and Sch 2 item 743, by amending the reference to a repealed inoperative provision in para (a)(ii), effective 14 September 2006. For application and savings provisions see the CCH Australian Income Tax Legislation archive .

705-227(4)
(Repealed by No 56 of 2010)

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705-227(5)
(Repealed by No 56 of 2010)

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