INCOME TAX (TRANSITIONAL PROVISIONS) ACT 1997 (ARCHIVE)

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-90 - CONSOLIDATED GROUPS  

Division 701 - Modified application provisions of Income Tax Assessment Act for certain consolidated groups formed in 2002-3 and 2003-4 financial years  

Subdivision 701-B - Modified application provisions  

SECTION 701-30 (ARCHIVE)   Undistributed, untaxed pre-formation profits of non-chosen transitional entities - adjustment to allocable cost amount and tax cost setting amount reduction for over-depreciated assets  
Section only applies to transitional groups formed at certain times

701-30(1)    
This section applies if the day on which the transitional group comes into existence is before 1 July 2003 or is both:

(a) the first day of the first income year of the head company starting after 30 June 2003; and

(b) before 1 July 2004.

Section only applies to non-chosen transitional entities in such groups

701-30(1A)    
This section applies to each transitional entity in the transitional group, other than a chosen transitional entity. This is so even if there are no chosen transitional entities at all.

Increase in step 3 of allocable cost amount on group formation

701-30(2)    
The amount to be added under section 705-90 (step 3 of allocable cost amount) of the Income Tax Assessment Act 1997 in working out the transitional group's allocable cost amount for the transitional entity is increased by the additional undistributed profits (the step 3 untaxed profits increase ) that would form part of the step 3 amount under that section if:

(a) subsections (3) and (4) of that section were disregarded; and

(b) it were a requirement of that section that, if any additional undistributed profits resulting from paragraph (a) of this subsection were distributed as dividends just before the group came into existence, the head company and each other transitional entity interposed between the head company and the transitional entity would be entitled to a rebate of income tax under section 46 or 46A of the Income Tax Assessment Act 1936 on the dividends.

Note:

If an entity interposed between the head company and the transitional entity is a non-fixed trust, this subsection may involve determining how a power of appointment would have been exercised. Section 713-50 of the Income Tax Assessment Act 1997 (applying because of section 700-1 of this Act) lists matters to have regard to in determining this.

Creation of, or increase in, tax deferral amount

701-30(3)    
For the purposes of applying section 705-50 (reduction in tax cost setting amount for over-depreciated assets) of the Income Tax Assessment Act 1997 in relation to an asset of the transitional entity that becomes that of the head company under subsection 701-1(1) of that Act when the transitional group comes into existence:

(a) if, before the transitional group came into existence, the transitional entity paid any dividends to which paragraph 705-50(2) (b) of that Act applies - the tax deferral amount in relation to the dividends under subsection 705-50(3) of that Act is increased by the amount worked out under subsection (4) of this section; and

(b) if paragraph (a) does not apply - the transitional entity is taken to have paid dividends to which paragraph 705-50(2) (b) of that Act applies and there is taken to be a tax deferral amount in relation to the dividends under subsection 705-50(3) of that Act whose amount is worked out under subsection (4) of this section.

Amount for purposes of paragraphs (3)(a) and (b)

701-30(4)    
The amount for the purposes of paragraphs (3)(a) and (b) is equal to the amount that would have been the step 3 untaxed profits increase if the undistributed profits constituting that increase were also required to satisfy the following requirements:

(a) the profits were not subject to income tax because of deductions for the asset's decline in value;

(b) the decline in value represented the over-depreciation of the asset;

(c) the deductions for the decline in value do not form part of a tax loss covered by the step 5 amount mentioned in step 5 in the table in section 705-60 of the Income Tax Assessment Act 1997 in working out the transitional group's allocable cost amount for the transitional entity.