Tax Laws Amendment (2004 Measures No. 2) Act 2004 (83 of 2004)

Schedule 2   Consolidation etc.

Part 13   Privatised assets

Income Tax (Transitional Provisions) Act 1997

76   After section 702-1

Insert:

702-4 Extended operation of subsection 40-285(3)

(1) This section applies in relation to a balancing adjustment event that occurs:

(a) for a depreciating asset held by an entity (the final entity ); and

(b) after the asset became an asset of the head company of a consolidated group because of section 701-1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group.

It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b).

Note: The final entity will be different from the head company if an entity (the leaving entity ) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity.

(2) The final entity is entitled to a further deduction under subsection 40-285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701-55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred.

Note: The final entity will be entitled to the deduction apart from paragraph 701-55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701-5 (the entry history rule) of that Act and perhaps also section 701-40 (the exit history rule) of that Act.

(3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred:

(a) the asset became the asset of the head company of a consolidated group because of section 701-1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity ) became a subsidiary member of the group; and

(b) the tax cost setting amount for the asset was more than the joining entity's terminating value for the asset.

It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b).

Note: In some cases, section 705-47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity's terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40-285(3) of this Act.