Income Tax (Transitional Provisions) Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 701 - Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002-03 and 2003-04 financial years  

Subdivision 701-B - Modified application of provisions  

SECTION 701-20   Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities  

When section applies

701-20(1)    
This section applies if any of the transitional entities in the transitional group is a chosen transitional entity.

Allocable cost amount to be worked out in special way

701-20(2)    
If this section applies, the group's allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non-chosen subsidiary ) is worked out in a special way.

How to work out allocable cost amount

701-20(3)    
The allocable cost amount for each non-chosen subsidiary is the sum of:

(a) the head company adjusted allocable amount for the non-chosen subsidiary (see subsection (4)); and

(b) for each sub-group (see subsection (6)) that exists in relation to the non-chosen subsidiary - the sub-group's notional allocable cost amount (see subsection(5)) for the non-chosen subsidiary.

Head company adjusted allocable amount

701-20(4)    
The head company adjusted allocable amount for the non-chosen subsidiary is the amount that would be the transitional group's allocable cost amount for that entity if:

(a) the holding of all sub-group membership interests were disregarded; and

(b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705-60 of the Income Tax Assessment Act 1997 was taken into account:

Market value of head company's direct and indirect membership interests in                                     non-chosen subsidiary                                     Market value of all membership interests in non-chosen subsidiary

where:

market value of all membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that are held by entities that become members of the group at that time.

market value of head company's direct and indirect membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub-group in relation to the non-chosen subsidiary.

Sub-group's notional allocable cost amount

701-20(5)    
For each sub-group that exists in relation to the non-chosen subsidiary, there is a sub-group's notional allocable cost amount . That amount is the amount that would be a consolidated group's allocable cost amount for the non-chosen subsidiary if:

(a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non-chosen subsidiary and the entities comprising the sub-group; and

(b) the chosen transitional entity in the sub-group were the head company of the consolidated group; and

(c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub-group membership interests (see subsection (6)) in relation to the sub-group, and any such entity held those membership interests during the period when it actually held them; and

(d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705-60 of the Income Tax Assessment Act 1997 was taken into account:

Market value of chosen transitional entity's direct and indirect membership interests in non-chosen                                                                             subsidiary                                                                             Market value of all membership interests in non-chosen subsidiary

where:

market value of all membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that are held by entities that become members of the group at that time.

market value of chosen transitional entity's direct and indirect membership interests in non-chosen subsidiary
means the market value, at the time the group comes into existence, of all membership interests in the non-chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub-group.

Sub-group and sub-group membership interests

701-20(6)    
If a chosen transitional entity holds membership interests in a non-chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non-chosen subsidiary:

(a) the chosen transitional entity and each interposed non-chosen subsidiary comprise a sub-group in relation to the non-chosen subsidiary (unless the non-chosen subsidiary is included in a sub-group in relation to another non-chosen subsidiary); and

(b) the following membership interests are the sub-group membership interests in relation to the sub-group:

(i) the membership interests that the chosen transitional entity holds directly in the non-chosen subsidiary or in any of the interposed non-chosen subsidiaries;

(ii) the membership interests that each interposed non-chosen subsidiary holds directly in the non-chosen subsidiary or in any of the other interposed non-chosen subsidiaries.