Treasury Laws Amendment (Income Tax Consolidation Integrity) Act 2018 (14 of 2018)

Schedule 1   Consolidation

Part 7   Value shifting

Income Tax Assessment Act 1997

27   After section 701-60

Insert:

701-60A Tax cost setting amount for asset emerging when entity leaves group

(1) This section applies for the purpose of working out the *tax cost setting amount of an asset if:

(a) an entity (the leaving entity ) ceases to be a *subsidiary member of a *consolidated group (the old group ) at a time (the leaving time ); and

(b) the asset's tax cost is set under section 701-45 because it consists of a liability (the corresponding liability ) owed to the leaving entity.

(2) The *tax cost setting amount is:

(a) unless subsection (3) or (4) applies - the *market value of the asset at the leaving time; or

(b) if subsection (3) applies - nil; or

(c) if subsection (4) applies - the least of the following amounts:

(i) the tax cost setting amount mentioned in paragraph (4)(c);

(ii) if the *head company of the old group was entitled to a deduction in respect of the asset for an income year ending on or before the leaving time - the tax cost setting amount mentioned in paragraph (4)(c) reduced by the amount of the deduction;

(iii) the market value of the asset at the leaving time.

(3) This subsection applies if:

(a) the corresponding liability is not a debt; and

(b) either:

(i) at the time the corresponding liability arose, the entity to whom the corresponding liability was owed and the entity owing the corresponding liability were both *members of the old group; or

(ii) if subparagraph (i) does not apply - after the time the corresponding liability arose, a member of the old group *acquired the asset or started to have the corresponding liability.

(4) This subsection applies if:

(a) the corresponding liability is not a debt; and

(b) at the time the corresponding liability arose, the entity to whom the corresponding liability was owed and the entity owing the corresponding liability were not both members of the old group; and

(c) the *tax cost of the asset was set under section 701-10 at the time an entity became a *subsidiary member of the old group, at the asset's *tax cost setting amount (whether or not section 701-58 applied in relation to the setting of that tax cost).