Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES

PART 3-90 - CONSOLIDATED GROUPS

Division 711 - Tax cost setting amount for membership interests where entities cease to be subsidiary members of consolidated groups

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Tax cost setting amount for membership interests etc.

SECTION 711-20 What is the old group ' s allocable cost amount for the leaving entity?

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711-20(1)

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Work out the old group ' s allocable cost amount for the leaving entity in this way:

Working out the old group ' s allocable cost amount for the leaving entity
Step	What the step requires	Purpose of the step
1	Start with the step 1 amount worked out under section 711-25, which is about the *terminating values of the leaving entity ' s assets just before the leaving time.	To ensure that the allocable cost amount includes the cost of the assets.
2	Add to the result of step 1 the step 2 amount worked out under section 711-35, which is about the value of deductions inherited by the leaving entity that are not reflected in the *terminating value of the leaving entity ' s assets just before the leaving time.	To ensure that the value of the deductions is reflected in the allocable cost amount.
3	Add to the result of step 2 the step 3 amount worked out under section 711-40, which is about liabilities owed by *members of the old group to the leaving entity at the leaving time.	To ensure that the liabilities, which are not recognised while the leaving entity is taken to be part of the *head company by subsection 701-1(1), are reflected in the allocable cost amount.
4	Subtract from the result of step 3 the step 4 amount worked out under section 711-45, which is about: (a) the leaving entity ' s liabilities just before the leaving time; and (b) membership interests in the leaving entity that are not held by members of the old group.	To ensure that the allocable cost amount is reduced to reflect the liabilities and the value of the membership interests.
5	If the amount remaining after step 4 is positive, it is the old group ' s allocable cost amount for the leaving entity. Otherwise the old group ' s allocable cost amount is nil.
6	(Repealed by No 90 of 2002)

Note:

If the amount remaining after step 4 is negative, the head company is taken to have made a capital gain equal to the amount: see CGT event L5.

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History

S 711-20(1) amended by No 56 of 2010, s 3 and Sch 5 item 214, by omitting " *market " after " reflect the liabilities and the " . For application provision see note under s 705-65(6) .

S 711-20(1) amended by No 56 of 2010, s 3 and Sch 5 items 79 to 81, by substituting " the *terminating values of the leaving entity ' s assets just before the leaving time " for " the *terminating values of assets that the leaving entity takes with it when it ceases to be a *subsidiary member " in the column headed " What the step requires " in table item 1, substituting " the *terminating value of the leaving entity ' s assets just before the leaving time " for " the *terminating value of the assets that the leaving entity takes with it " in the column headed " What the step requires " in table item 2 and substituting " (a) the leaving entity ' s liabilities just before the leaving time; and " for " (a) the liabilities that the leaving entity takes with it when it ceases to be a *subsidiary member; and " in the column headed " What the step requires " in table item 4. No 56 of 2010, s 3 and Sch 5 item 87 contains the following application provision:

Application provision
(1)
The amendments made by this Division apply on and after the day on which the Bill that became this Act was introduced into the House of Representatives.

(2)
The amendments made are to be disregarded for the purposes of interpreting:

(a) the provisions amended, as they applied before the day mentioned in subitem (1); and

(b) any other provision of the Income Tax (Transitional Provisions) Act 1997 , as that provision applied before the day mentioned in subitem (1), to the extent that it relates to a provision mentioned in paragraph (a).

S 711-20(1) amended by No 16 of 2003, s 3 and Sch 21 item 7, by inserting " : see CGT event L5 " at the end of the note, 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 711-20(1) table amended by No 90 of 2002, s 3 and Sch 2 items 39 and 40, by substituting table item 5 for table items 5 and 6, and substituting " step 4 " for " step 5 " in the note, 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 table items formerly read:

" Working out the old group ' s allocable cost amount for the leaving entity

Step What the step requires Purpose of the step

5 If section 711-50 (about unrealised net losses) applies, subtract the step 5 amount mentioned in subsection (2) of that section. To ensure that the *head company cannot avoid denial of losses by *disposing of assets through a leaving entity instead of by direct sale etc.

6 If the amount remaining after step 5 is positive, it is the old group ' s allocable cost amount for the leaving entity. Otherwise the old group ' s allocable cost amount is nil.

Recalculation in order to work out amount of capital loss

711-20(2)
If it is necessary to work out whether the ^* head company makes a capital loss for a ^* CGT event that happens at or after the leaving time in relation to any of the ^* membership interests, the old group ' s allocable cost amount for the leaving entity is instead worked out as if the head company ' s ^* terminating value for any asset covered by subsection 705-30(4) (as it applies for the purposes of section 711-30 ) were instead equal to the asset ' s ^* reduced cost base just before the leaving time.

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" Working out the old group ' s allocable cost amount for the leaving entity
Step	What the step requires	Purpose of the step
5	If section 711-50 (about unrealised net losses) applies, subtract the step 5 amount mentioned in subsection (2) of that section.	To ensure that the head company cannot avoid denial of losses by disposing of assets through a leaving entity instead of by direct sale etc.
6	If the amount remaining after step 5 is positive, it is the old group ' s allocable cost amount for the leaving entity. Otherwise the old group ' s allocable cost amount is nil.