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 705-230 Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests

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Object

705-230(1)
The object of this section is to ensure that, in working out the group's ^* allocable cost amount for the linked entities, the reduction under step 4 in the table in section 705-60 (about pre-formation time distributions out of certain profits) is made only for profits that have been effectively distributed to the ^* head company in respect of its direct ^* membership interests in the entities. This ensures consistency with the ordering rule in section 705-225 .

When section applies

705-230(2)
This section applies to a distribution to the extent that the following conditions are satisfied:

(a) the distribution is made by a linked entity;

(b) in working out the group's ^* allocable cost amount for the linked entity there would, apart from this section, be a reduction under step 4 in the table in section 705-60 for the distribution.

Step 4 reduction only if subject distribution is made to head company

705-230(3)
There is no reduction as mentioned in subsection (2) for the distribution unless it is made to the ^* head company of the group.

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History

S 705-230 substituted by No 16 of 2003, s 3 and Sch 1 item 2, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec 700-1 of the Income Tax (Transitional Provisions) Act 1997 ). S 705-230 formerly read:

Adjustment in working out step 4 of allocable cost amount for successive distributions through interposed linked entities

Object

705-230(1)
The object of this section is to ensure that, in working out the group's ^* allocable cost amount for the linked entities, there is only one reduction under step 4 in the table in section 705-60 (about pre-formation time distributions out of certain profits) for distributions of the same profits.
When section applies

705-230(2)
This section applies if, apart from this section:

(a) in working out the group's ^* allocable cost amount for a linked entity, there would be a reduction under step 4 in the table in section 705-60 for a distribution (the first distribution ) made by the entity; and

(b) in working out the group's allocable cost amount for a second linked entity, there would also be a reduction under that step for any of the first distribution that the second linked entity successively distributed as mentioned in paragraph 705-95(a) .
No step 4 reduction in respect of successive distribution of amount for which there has already been a step 4 reduction

705-230(3)
If this section applies, there is no reduction as mentioned in paragraph (2)(b).

S 705-230 inserted by No 117 of 2002, s 3 and Sch 4 item 4, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec 700-1 of the Income Tax (Transitional Provisions) Act 1997 ).

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