CHAPTER 3
-
SPECIALIST LIABILITY RULES
PART 3-90
-
CONSOLIDATED GROUPS
History
Part 3-90 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
).
Division 711
-
Tax cost setting amount for membership interests where entities cease to be subsidiary members of consolidated groups
History
Div 711 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
).
Tax cost setting amount for membership interests etc.
SECTION 711-70
Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711-65
-
application of Division 149 to head company
711-70(1)
This section applies if:
(a)
the leaving entity held assets at the time it became a *subsidiary member of the old group (disregarding subsection
701-1(1)
(the single entity rule)); and
(b)
some or all of the assets:
(i)
stopped being *pre-CGT assets under Division
149
at a time (the
Division 149 time
) when the *head company of the group held them under subsection
701-1(1)
(the single entity rule); or
(ii)
would have stopped being pre-CGT assets under Division
149
at a time (also the
Division 149 time
) when the head company of the group held them under subsection
701-1(1)
(the single entity rule) if they had been pre-CGT assets just before that time; and
(c)
the leaving entity was a subsidiary member of the group at that time.
711-70(2)
The *pre-CGT proportion of the leaving entity at the leaving time is taken to be nil.
711-70(3)
Adjust the old group's *allocable cost amount for the leaving entity as follows:
(a)
if the amount under subsection (4) exceeds the amount under subsection (6)
-
increase the allocable cost amount by the excess;
(b)
if the amount under subsection (4) falls short of the amount under subsection (6)
-
reduce the allocable cost amount by the shortfall.
711-70(4)
Subject to subsection (5), the amount under this subsection is:
(a)
if Subdivision
705-A
applied in relation to the leaving entity at the time it became a *subsidiary member of the old group
-
the total of the amounts that were taken into account under subsection
705-65(1)
for *membership interests in the leaving entity at that time; or
(b)
otherwise
-
assuming that Subdivision
705-A
had applied in relation to the leaving entity at the time it became a subsidiary member of the old group, the total of the amounts that would have been taken into account under subsection
705-65(1)
for membership interests in the leaving entity at that time.
711-70(5)
For the purposes of subsection (4), if a *membership interest in the leaving entity was covered under paragraph
705-125(2)(a)
(pre-CGT interests) when it became a *subsidiary member of the old group, treat the amount that was taken into account for the membership interest under subsection
705-65(1)
as the interest's *market value just after the Division
149
time.
711-70(6)
The amount under this subsection is the old group's *allocable cost amount for the leaving entity, worked out on the assumption that the leaving entity ceased to be a *subsidiary member of the old group just after the Division
149
time.
History
S 711-70 and 711-75 substituted for s 711-70 by No 56 of 2010, s 3 and Sch 5 item 30, effective 3 June 2010. For application provision, see note under section
705-125(1)
. S 711-70 formerly read:
SECTION 711-70 Membership interests treated as having been acquired before 20 September 1985
-
multiple exit case
711-70(1)
If 2 or more entities (
multiple exit entities
) cease to be
*
subsidiary members of the old group at the same time because of an event happening in relation to one of them (other than where Subdivision 705-C applies), a number of the
*
membership interests (
subject interests
) held in any multiple exit entity by:
(a)
*
members of the old group; or
(b)
other multiple exit entities; or
(c)
any combination of paragraphs (a) and (b);
are taken to have been acquired before 20 September 1985.
History
S 711-70(1) amended by No 117 of 2002, s 3 and Sch 4 item 7, by inserting
"
(other than where Subdivision 705-C applies)
"
, effective 24 October 2002 and applicable on and after 1 July 2002 (see sec
700-1
of the
Income Tax (Transitional Provisions) Act 1997
).
Numbers to be worked out first for bottom entities
711-70(2)
Numbers are to be worked out first for subject interests in multiple exit entities that do not themselves hold any of the subject interests in other multiple exit entities.
Numbers to be worked out progressively up to those subject interests held only by members of the old group
711-70(3)
If the holders of other subject interests are or include multiple exit entities, numbers must be worked out for the former subject interests before both the latter and any subject interests whose holders consist entirely of
*
members of the old group.
How to work out the numbers
711-70(4)
The number for subject interests in a particular multiple exit entity that is required to be worked out under subsection (2) or (3) is worked out by applying subsections 711-65(3) to (6) as if:
(a)
a reference in those subsections to
*
membership interests that members of the old group hold in the leaving entity were a reference to the subject interests; and
(b)
assets (
previously numbered assets
) of the multiple exit entity consisting of other subject interests for which a number has been worked out as required by subsection (2) or (3) of this section were assets that the
*
head company holds at the leaving time because the entity is taken by section 701-1 to be a part of the
*
head company; and
(c)
each previously numbered asset were treated as having a
*
pre-CGT factor of 1.
Example:
Companies A, B, C, D and E are all subsidiary members that leave the old group at the same time. Just before the leaving time, company A owned shares in company B and company C, and company B owned shares in companies D and E.
First, work out company A
'
s number for membership interests in company C and company B
'
s number for membership interests in companies D and E.
Next, work out company A
'
s number for membership interests in company B, taking into account the number just worked out for company B
'
s assets consisting of shares in companies D and E.
Finally, work out the old group
'
s number for membership interests in company A, taking into account the numbers worked out for its assets consisting of shares in companies B and C.
Note:
Because of the deemed acquisition of the membership interests, this section is the only basis on which any of the subject interests can be pre-CGT assets.
Allocation of the number to particular membership interests
711-70(5)
The
*
head company must:
(a)
choose which particular
*
membership interests comprise any number worked out under this section; and
(b)
if any
*
membership interest that is so chosen is held by a multiple exit entity
-
inform that entity of the fact.
Modification if leaving entity is a trust
711-70(6)
A
*
membership interest in a trust that is one of the multiple exit entities is not taken into account under this section unless the membership interest is either a unit or an interest in the trust.
History
S 711-70(6) inserted by No 117 of 2002, s 3 and Sch 5 item 5, 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 711-70 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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