Tax Laws Amendment (2010 Measures No. 1) Act 2010 (56 of 2010)

Schedule 5   Consolidation

Part 7   Leaving time liabilities

2   Division 2 - Adjustment of step 4 amount

Income Tax Assessment Act 1997

88   Subsection 711-45(8)

Repeal the subsection, substitute:

Adjustment where amount of liability differed for purpose of calculating allocable cost amount on entry

(8) Subsection (10) applies if:

(a) either:

(i) an amount (the exit liability amount ) was added for a particular liability under subsection (5); or

(ii) a particular liability is covered by subsection (5), but no amount was added for it under that subsection (in which case the exit liability amount is zero); and

(b) the liability was taken into account in working out the *allocable cost amount (the original entry ACA ) for a *subsidiary member (whether or not the leaving entity) of the old group in accordance with Division 705; and

(c) the exit liability amount is not the same as the amount (the entry liability amount ) of the liability that was taken into account in working out the original entry ACA, after any adjustments made under:

(i) section 705-70, 705-75 or 705-80; and

(ii) subsection (9) of this section; and

(d) if the liability is a provision for annual leave or long service leave, or a provision for a liability contingent on a future event:

(i) in the case of a liability that was, in accordance with the *accounting principles that the entity would have used if it had prepared its financial statements just before the time it became a subsidiary member of the group, a current liability of the entity at that time - the leaving time occurs less than 1 year after that time; or

(ii) otherwise - the leaving time occurs less than 4 years after that time.

(9) Make these adjustments to the entry liability amount if, at a time when the leaving entity was a *subsidiary member of the old group, the *head company of the group paid an amount that reduced the liability:

(a) reduce the entry liability amount by the amount of the reduction; and

(b) if the payment gave rise to an amount being included in the assessable income of the head company - after making the reduction in paragraph (a), further reduce the entry liability amount by the product of:

(i) the amount included in assessable income; and

(ii) the *corporate tax rate; and

(c) if the payment gave rise to a deduction for the head company - after making the reduction in paragraph (a), increase the entry liability amount by the product of:

(i) the amount deducted; and

(ii) the corporate tax rate.

(10) The step 4 amount is altered by:

(a) if the entry liability amount exceeds the exit liability amount - increasing the step 4 amount by the excess; or

(b) if the entry liability amount falls short of the exit liability amount - decreasing the step 4 amount by the shortfall.