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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How to work out the allocable cost amount

SECTION 705-60

705-60 What is the joined group ' s allocable cost amount for the joining entity?

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Work out the joined group ' s allocable cost amount for the joining entity in this way:

Working out the joined group ' s allocable cost amount for the joining entity
Step	What the step requires	Purpose of the step
1	Start with the step 1 amount worked out under section 705-65, which is about the cost of ^* membership interests in the joining entity held by ^* members of the joined group	To ensure that the allocable cost amount includes the cost of ^* acquiring the membership interests
2	Add to the result of step 1 the step 2 amount worked out under section 705-70, which is about the value of the joining entity ' s liabilities	To ensure that the joining entity ' s liabilities at the joining time, which are part of the joined group ' s cost of acquiring the joining entity, are reflected in the allocable cost amount
3	Add to the result of step 2 the step 3 amount worked out under: (a) section 705-90, which is about undistributed, taxed profits accruing to the joined group before the joining time; or (b) if the joining entity is a trust (and not a ^* corporate tax entity) - section 713-25, which is about undistributed, realised profits accruing to the joined group before the joining time that could be distributed tax free	To increase the allocable cost amount: (a) to reflect the undistributed, taxed profits and so prevent double taxation; or (b) if the joining entity is a trust - to reflect the undistributed, realised profits that could be distributed tax free
3A	For each step 3A amount (if any) under section 705-93 (which is about pre-joining time roll-overs): (a) if the step 3A amount is a deferred roll-over loss - add to the result of step 3 (as affected by any previous application of this step) the step 3A amount; or (b) if the step 3A amount is a deferred roll-over gain - subtract from the result of step 3 (as affected by any previous application of this step) the step 3A amount	To adjust for certain roll-overs before the joining time affecting deferred gains and losses
4	Subtract from the result of step 3A the step 4 amount worked out under section 705-95, which is about pre-joining time distributions out of certain profits	To prevent the allocable cost amount reflecting return of part of the amount paid to ^* acquire the ^* membership interests in the joining entity
5	Subtract from the result of step 4 the step 5 amount worked out under section 705-100, which is about certain losses accruing to the joined group before the joining time	To prevent: (a) a double benefit arising from the losses; and (b) losses that cannot be transferred to the ^* head company, or are cancelled by the head company, under Subdivision 707-A being reinstated in an unrealised form or reducing unrealised gains.
5A	Subtract from the result of step 5 the step 5A amount worked out under section 705-102 , which is about certain *FRT disallowed amounts accruing to the joined group before the joining time	To prevent a double benefit arising from the FRT disallowed amounts
6	Subtract from the result of step 5A the step 6 amount worked out under section 705-110 , which is about losses that the joining entity transferred to the ^* head company under Subdivision 707-A	To stop the joined group getting benefits both through higher ^* tax cost setting amounts for the joining entity ' s assets and through losses transferred to the head company
6A	Subtract from the result of step 6 the step 6A amount worked out under section 705-112 , which is about FRT disallowed amounts that the joining entity transferred to the head company under section 820-590	To stop the joined group getting benefits both through higher *tax cost setting amounts for the joining entity ' s assets and through FRT disallowed amounts transferred to the head company
7	Subtract from the result of step 6A the step 7 amount worked out under section 705-115 , which is about certain deductions to which the ^* head company is entitled	To stop the joined group getting benefits both through the ^* tax cost of the joining entity ' s assets being set and through certain tax deductions of the joining entity being inherited by the head company
8	If the remaining amount is positive, it is the joined group ' s allocable cost amount. Otherwise the joined group ' s allocable cost amount is nil.

Note:

The head company may be taken to have made a capital gain, depending on the amount remaining after applying step 3A: see CGT event L2.

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History

S 705-60 amended by No 23 of 2024, s 3 and Sch 2 items 4A - 6, by inserting table item 5A, substituting " step 5A " for " step 5 " in table item 6, column headed " What the step requires " , inserting table item 6A and substituting " step 6A " for " step 6 " in table item 7, column headed " What the step requires " , effective 1 July 2024. No 23 of 2024, s 3 and Sch 2 items 144 - 146 contain the following application provisions:

144 Application
(1)
Subject to this Part, the amendments made by Part 1 of this Schedule apply in relation to assessments for income years starting on or after 1 July 2023.

(2)
However, the amendments made by that Part to section 820-980 of the Income Tax Assessment Act 1997 do not apply in relation to records mentioned in that section (disregarding those amendments) that relate to one or more income years starting before 1 July 2023.

(3)
Despite subitem (1), Subdivision 820-EAA of the Income Tax Assessment Act 1997 , as inserted by Part 1 of this Schedule, applies in relation to assessments for income years starting on or after 1 July 2024.
145 Transitional - choice
If:
(a) before the commencement of this Part, an entity made a choice set out in item 1 of the table in subsection 820-430(1) of the Income Tax Assessment Act 1997 ; and
(b) immediately before that commencement, the choice had effect;
after that commencement, the choice continues to have effect as if it were a choice set out in that item as amended by Part 1.
146 Saving - old law continues to apply to Australian plantation forestry entities
(1)
Despite the amendments made by Part 1 of this Schedule, the old law continues to apply in relation to assessments for income years starting on or after 1 July 2023 for entities that are Australian plantation forestry entities for a period that is all or part of the income year, as if the amendments had not been made.

(2)
In this item:
Australian plantation forestry entity
, at a particular time, means an entity that solely or predominantly carries on a business, at that time, of establishing and tending trees for felling in Australia.

old law
means the following provisions, as in force immediately before the commencement of this item:
(a) Division 820 of the Income Tax Assessment Act 1997 ;
(b) any other provision of that Act to the extent that it relates to that Division;
(c) any provision in an instrument (whether legislative or administrative) made under that Act to the extent that it relates to that Division.

S 705-60 amended by No 56 of 2010, s 3 and Sch 5 item 40, by substituting table item 3A, applicable on and after 1 July 2002. Table item 3A formerly read:

3A ... For each step 3A amount (if any) under section 705-93 (which is about pre-joining time intra-group roll-overs from foreign resident companies): ... (a) if the step 3A amount is an increase amount under that section - add to the result of step 3 (as affected by any previous application of this step) the step 3A amount; or ... (b) if the step 3A amount is a reduction amount under that section - subtract from the result of step 3 (as affected by any previous application of this step) the step 3A amount ... To adjust for certain intra-group roll-overs from foreign companies before the joining time

S 705-60 amended by No 23 of 2005.

S 705-60 amended by No 16 of 2003, s 3 and Sch 1 items 11 to 13, by inserting table item 3A, substituting " step 3A " for " step 3 " in table item 4 and 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 705-60 (table) amended by No 16 of 2003, s 3 and Sch 1 item 3, by substituting " taxed " for " frankable " in item 3 of the column headed " What the step requires " , 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 705-60 (table) amended by No 117 of 2002, s 3 and Sch 5 item 7, by substituting item 3, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec 700-1 of the Income Tax (Transitional Provisions) Act 1997 ). The item formerly read:

" Working out the joined group ' s allocable cost amount for the joining entity
Step	What the step requires	Purpose of the step
3	Add to the result of step 2 the step 3 amount worked out under section 705-90, which is about undistributed, frankable profits accruing to the joined group before the joining time	To increase the allocable cost amount to reflect the undistributed, taxed profits and so prevent double taxation "

S 705-60 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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