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-A - Basic case: a single entity joining an existing consolidated group

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Tax cost setting amount for assets that joining entity brings into joined group

SECTION 705-25 Tax cost setting amount for retained cost base assets

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705-25(1)
This section states what the ^* tax cost setting amount is for a ^* retained cost base asset.

Australian currency

705-25(2)

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If the ^* retained cost base asset is covered by paragraph (a), (b) or (ba) of the definition of that expression and is not covered by another subsection of this section, its ^* tax cost setting amount is equal to the amount of the Australian currency concerned.

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Qualifying securities

705-25(3)
If the ^* retained cost base asset is a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936 ), the ^* tax cost setting amount for the qualifying security is instead equal to the joining entity ' s ^* terminating value for the asset.

Entitlements to pre-paid services etc.

705-25(4)
If the ^* retained cost base asset is covered by paragraph (c) of the definition of that expression, its ^* tax cost setting amount is equal to the amount of the deductions to which the ^* head company is entitled under section 701-5 (the entry history rule) in respect of the expenditure that gave rise to the entitlement.

Note:

If the total amount to be treated as tax cost setting amounts for retained cost base assets exceeds the joined group ' s allocable cost amount for the joining entity, the head company makes a capital gain equal to the excess: see CGT event L3.

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Financial arrangements to which Subdivision 250-E applies

705-25(4A)

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The *tax cost setting amount is instead equal to the joining entity ' s *terminating value for the *retained cost base asset if the asset is a *financial arrangement to which Subdivision 250-E applies immediately before the joining time.

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Rights to payments in respect of uncompleted work etc

705-25(4B)

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If the *retained cost base asset is covered by paragraph (d) or (e) of the definition of that expression, its *tax cost setting amount is equal to the joining entity ' s *terminating value for the asset.

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Retained cost base asset

705-25(5)
A retained cost base asset is:

(a) Australian currency, other than ^* trading stock or ^* collectables of the joining entity; or

(b) a right to receive a specified amount of such Australian currency, other than a right that is a marketable security within the meaning of section 70B of the Income Tax Assessment Act 1936 ; or

Example:

A debt or a bank deposit.

(ba)

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a unit in a *cash management trust, if:

(i) the redemption value of the unit is expressed in Australian dollars; and

(ii) the redemption value of the unit cannot increase; or

(c)

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a right to have something done under an ^* arrangement under which:

(i) expenditure has been incurred in return for the doing of the thing; and

(ii) the thing is required or permitted to be done, or to cease being done, after the expenditure is incurred; or

(d)

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a * right to future income (other than a * WIP amount asset); or

(e) a *depreciating asset that the joining entity *holds as a result of a *balancing adjustment event mentioned in paragraph 417-30(2)(b) .

Note 1:

There are some additional retained cost base assets for a joining entity that is a life insurance company: see Subdivision 713-L . The tax cost setting amount for those assets is worked out under that Subdivision.

Note 2:

The joining entity ' s right to receive lease payments under a lease is treated as a retained cost base asset in some circumstances (see paragraph 705-56(3)(b) ).

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History

S 705-25(5) amended by No 127 of 2021, s 3 and Sch 3 item 65, by omitting " finance " before " lease " from note 2, effective 1 January 2022 and applicable in relation to an entity that becomes, on or after 1 January 2019, a subsidiary member of a consolidated group or a subsidiary member of a MEC group.

S 705-25(5) amended by No 59 of 2019, s 3 and Sch 2 items 14 and 15, by substituting " asset); or " for " asset). " in para (d) and inserting para (e), effective 30 August 2019.

S 705-25(5) amended by No 99 of 2012, s 3 and Sch 3 item 36, by substituting para (d), effective 29 June 2012. For application provisions see note under s 701-55(5C) . Para (d) formerly read:

(d) a right that is an asset covered by section 716-410 (rights to amounts that are expected to be included in assessable income) if at the time the right was created:

(i) the *head company was the head company of a *consolidatable group; and

(ii) the joining entity was a *subsidiary member of the consolidatable group.

S 705-25(5) amended by No 99 of 2012, s 3 and Sch 3 item 21, by substituting " a right that is an asset covered by section 716-410 (rights to amounts that are expected to be included in assessable income) " for " a right that is an * unbilled income asset " in para (d), effective 29 June 2012. For application provisions see note under s 701-55(5C) .

S 705-25(5) amended by No 99 of 2012, s 3 and Sch 1 item 8, by substituting " a right that is an *unbilled income asset " for " a right that is an asset covered by section 716-410 (rights to future amounts that are expected to be included in assessable income) " in para (d), effective 29 June 2012. For application provisions see note under s 701-55(5C) .

S 705-25(5) amended by No 41 of 2011, s 3 and Sch 5 item 417, by omitting " ; or " (last occurring) after " incurred " from para (c)(ii), effective 27 June 2011.

S 705-25(5) amended by No 56 of 2010, s 3 and Sch 5 items 124 and 125, by inserting para (d), applicable in relation to a consolidated group or MEC group on and after 1 July 2002.

S 705-25(5) amended by No 56 of 2010, s 3 and Sch 5 item 121, by inserting para (ba). For application provision see note under s 705-25(2).

S 705-25(5) amended by No 23 of 2005.

S 705-25(5) amended by No 16 of 2003, s 3 and Sch 6 item 6, by inserting the note at the end, 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 705-25 inserted by No 68 of 2002, 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 ).

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