Taxation Determination TD 2014/23
Date of effect: 17 December 2014

What this ruling is about: This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953. A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. Ruling 1. The pre rules [1] will apply, by virtue of subitem 50(6) of Part 4 of Schedule 3 to the Tax Laws Amendment (2012 Measures No. 2) Act 2012, [2] only to the extent that the subsequent amendment request alters an existing claim that relates to the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity. 2. A request for an amendment of an assessment to alter an existing claim that has been made through subsection 701-55(6) of the original 2002 law is considered to be an amendment that 'relates to' the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity for the purposes of paragraph 50(6)(a). The pre rules will apply to the altered claim and the original 2002 law will continue to apply to other claims included in the assessment that satisfy the conditions in subitem 50(5). 3. A request for an amendment of an assessment to make a new claim for a deduction, for example, for consumable stores or for an unbilled income asset is not considered to be an amendment that 'relates to' the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity, for the purposes of paragraph 50(6)(a). The pre rules will apply to the new claim and the original 2002 law will continue to apply to other claims included in the assessment that satisfy the conditions in subitem 50(5). Examples Note: the following examples are provided for the purposes of illustrating the Commissioner's view about the way in which subitem 50(6) applies and do not provide a view about the application of subsection 701-55(6) of the original 2002 law, section 8-1 of the ITAA 1997 or subsection 701-55(5D) of the pre rules. Example 1: head company requests an amendment to make a new claim for a deduction for consumable stores 4. Aco joined the XYZ consolidated group on 1 July 2008. The assets of Aco at the joining time consisted of cash at bank, consumable stores and an asset that would be a non-deductible right to future income under the pre rules. 5. For the income year ended 30 June 2009, Headco has claimed a deduction for the tax cost of the non-deductible right to future income asset under section 8-1 by applying subsection 701-55(6) of the original 2002 law but did not claim a deduction for consumable stores. A notice of assessment for that income year was served on the head company before 12 May 2010. 6. On 1 July 2012 Headco requested an amendment of that assessment to claim a deduction for consumable stores under section 8-1 of the ITAA 1997 by applying subsection 701-55(5D) of the pre rules. No amended notice of assessment has been served on the head company. 7. As the amendment request does not 'relate to' an existing claim for consumable stores, paragraph 50(6)(a) does not apply. The new claim for the deduction will be determined under the pre rules. 8. Further, the original 2002 law, provided for by subitem 50(5), will continue to apply to the claim for the non-deductible right to future income (the pre rules will not apply to it) because it is not the subject of the amendment request. Example 2: head company requests an amendment to adjust the quantum of a previous claim for consumable stores 9. Aco joined the XYZ consolidated group on 1 July 2008. The assets of Aco at the joining time consisted of cash at bank, consumable stores and an asset that would be a non-deductible right to future income under the pre rules. 10. For the income year ended 30 June 2009, Headco has made claims for deductions for the tax costs of consumable stores and the non-deductible right to future income asset under section 8-1 of the ITAA 1997 by applying subsection 701-55(6) of the original 2002 law. A notice of assessment for that income year was served on the head company before 12 May 2010. 11. On 1 July 2012 Headco requested an amendment of that assessment to increase the claim for the consumable stores under section 8-1 by applying subsection 701-55(5D) of the pre rules. No amended notice of assessment has been served on the head company. 12. As the amendment request to increase the existing claim for consumable stores 'relates to' the application of subsection 701-55(6) of the original 2002 law, paragraph 50(6)(a) applies, resulting in the application of the original 2002 law being removed in respect of the existing claim for consumable stores. Instead the amended claim for the deduction will be determined under the pre rules. 13. Further, the original 2002 law, provided for by subitem 50(5), will continue to apply to the claim for the non-deductible right to future income (the pre rules will not apply to it) because it is not the subject of the amendment request. Date of effect 14. This Determination applies to years of income commencing both before and after its date of issue. However, this Determination will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Determination (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). Commissioner of Taxation 17 December 2014



Examples: Example 1: head company requests an amendment to make a new claim for a deduction for consumable stores 4. Aco joined the XYZ consolidated group on 1 July 2008. The assets of Aco at the joining time consisted of cash at bank, consumable stores and an asset that would be a non-deductible right to future income under the pre rules. 5. For the income year ended 30 June 2009, Headco has claimed a deduction for the tax cost of the non-deductible right to future income asset under section 8-1 by applying subsection 701-55(6) of the original 2002 law but did not claim a deduction for consumable stores. A notice of assessment for that income year was served on the head company before 12 May 2010. 6. On 1 July 2012 Headco requested an amendment of that assessment to claim a deduction for consumable stores under section 8-1 of the ITAA 1997 by applying subsection 701-55(5D) of the pre rules. No amended notice of assessment has been served on the head company. 7. As the amendment request does not 'relate to' an existing claim for consumable stores, paragraph 50(6)(a) does not apply. The new claim for the deduction will be determined under the pre rules. 8. Further, the original 2002 law, provided for by subitem 50(5), will continue to apply to the claim for the non-deductible right to future income (the pre rules will not apply to it) because it is not the subject of the amendment request. | Example 2: head company requests an amendment to adjust the quantum of a previous claim for consumable stores 9. Aco joined the XYZ consolidated group on 1 July 2008. The assets of Aco at the joining time consisted of cash at bank, consumable stores and an asset that would be a non-deductible right to future income under the pre rules. 10. For the income year ended 30 June 2009, Headco has made claims for deductions for the tax costs of consumable stores and the non-deductible right to future income asset under section 8-1 of the ITAA 1997 by applying subsection 701-55(6) of the original 2002 law. A notice of assessment for that income year was served on the head company before 12 May 2010. 11. On 1 July 2012 Headco requested an amendment of that assessment to increase the claim for the consumable stores under section 8-1 by applying subsection 701-55(5D) of the pre rules. No amended notice of assessment has been served on the head company. 12. As the amendment request to increase the existing claim for consumable stores 'relates to' the application of subsection 701-55(6) of the original 2002 law, paragraph 50(6)(a) applies, resulting in the application of the original 2002 law being removed in respect of the existing claim for consumable stores. Instead the amended claim for the deduction will be determined under the pre rules. 13. Further, the original 2002 law, provided for by subitem 50(5), will continue to apply to the claim for the non-deductible right to future income (the pre rules will not apply to it) because it is not the subject of the amendment request. Date of effect 14. This Determination applies to years of income commencing both before and after its date of issue. However, this Determination will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Determination (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). Commissioner of Taxation 17 December 2014 15. The Application rules in Part 4 of Schedule 3 are relevant to ascertaining whether the pre rules, interim rules [3] or prospective rules [4] apply in relation to an assessment of the head company of a consolidated group or multiple entry consolidated group in respect of an entity (the 'joining entity') when that entity joins the group. 16. Subitem 50(1) provides that: 17. Subitem 50(2) provides that the pre rules will apply to an assessment of the head company of a consolidated group for an income year in respect of a joining entity if the entity joined the group before 12 May 2010 (or where the arrangement under which the entity joined the group commenced before 10 February 2010). 18. There are two exceptions to the pre rules, namely the interim rules as provided for in subitem 50(3) and the original 2002 law as provided for in subitem 50(5). 19. The exceptions largely protect assessments served on or before 30 March 2011 from the effect of retrospective law changes made by Schedule 3. Where the exceptions apply to an assessment, and it is amended to alter an existing claim for a deduction the protection is removed to the extent of the altered claim. In this scenario, other existing claims for deductions in the assessment will continue to be protected notwithstanding that amendment. However, altering an existing claim for a deduction, in an assessment covered by paragraph 50(3)(a), on or after 29 June 2012 in order to give effect to the interim rules, will not remove the protection in respect of that claim. Conversely, where, in relation to a particular item, no claim has been made by 30 March 2011, subsequently amending an assessment on or after 29 June 2012 to make a claim for the first time will not benefit from protection. Also, if the altered claim is for a deduction not affected by Schedule 3 (for example, the claim is for a decline in value amount for a depreciating asset) the removal of the protection will make no difference. 20. Relevant to this Determination, subitem 50(5) states: 21. The term 'assessment' in relation to an income tax liability is defined by subsection 6(1) of the Income Tax Assessment Act 1936. Paragraph (a) of the definition provides that 'assessment' means the ascertainment of: 22. An assessment is made up of elements or particulars. A 'particular' is a specific or definite constituent element in the assessment of the taxable income (or that there is no taxable income) or tax payable thereon (or that there is no tax payable). [5] A claim for a deduction is an example of a particular or an element of an assessment 23. The extent to which the original 2002 law applies can be discerned when subitem 50(5) is considered in the context of subitems 50(1) and 50(2) such that subitem 50(5) confers the application of the original 2002 law to any particulars in respect of the joining entity that have been included in the head company's assessment for an income year. In order for the exception in subitem 50(5) to apply to that assessment, the particulars must include a claim that relates to the application of subsection 701-55(6) of the original 2002 law. 24. Subitem 50(6) states that subitem 50(5) does not apply if: 25. Subitem 50(6) does not state that subitem 50(5) does not apply 'to the extent' of the amended particular or similar. On a literal reading, if the conditions in subitem 50(6) were satisfied, subitem 50(5) would no longer apply to the relevant assessment for the income year and the pre rules would apply to all claims that relate to the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity. 26. Subitem 50(5) preserves the operation of the original 2002 law to claims made, that relate to the application of subsection 701-55(6) of the original 2002 law, provided they are not altered. As subitem 50(5) is interpreted as applying to any particulars in respect of the joining entity that have been included in the head company's assessment, it follows that subitem 50(6) also operates at the level of particulars. This interpretation ensures that subitem 50(6) interacts appropriately with subitem 50(5). 27. Paragraph 50(6)(a) applies if the amendment 'relates to' the application of subsection 701-55(6) of the original 2002 law. 28. The term 'relates to' denotes a connection or relationship between the amendment request and the application of subsection 701-55(6) of the original 2002 law. 'Related' is defined in the Macquarie Dictionary as 'to have reference (to) or to have some relation (to)'. The term 'relating to' has been considered by the courts and has been afforded a wide interpretation: Fountain v. Alexander (1982) 150 CLR 615 at 629; Colakovski v. Australian Telecommunications Corp (1991) 100 ALR 111. However, overall the term has been determined by the courts with reference to the statutory context and purpose: Butler v. Johnston (1984) 55 ALR 265 at 268; Hatfield v. Health Insurance Commission (1987) 77 ALR 103 at 106-7. 29. The purpose of paragraph 50(6)(a) can be seen as giving effect to the Government's statement in Media Release No. 59 of 25 November 2011 at paragraph 30, Table 2, Item 2 which states that where the original 2002 rules applied: 30. Further, paragraph 3.120 of the Explanatory Memorandum to Tax Laws Amendment (2012 Measures No. 2) Bill 2012, states: 31. Given that subitems 50(5) and 50(6) operate at the level of particulars and having regard to statements in the Explanatory Memorandum and the Media Release as cited above, it can be inferred that the purpose of paragraph 50(6)(a) is to enable claims for deductions such as those for unbilled income assets or consumable stores to be made without removing the application of the original 2002 law in respect of all other claims in the relevant assessment as a result of requesting an amendment to access such claims or to change the quantum of existing claims. 32. Therefore, where a head company requests an amendment to make a new claim for unbilled income or consumable stores, there is no existing claim in the head company's latest notice of assessment that can be said to 'relate to' the application of subsection 701-55(6) of the original 2002 law. In other words, there is no existing claim in the head company's latest notice of assessment to which subitem 50(5) can apply in the first instance. On the basis that subitem 50(5) does not apply in the first instance, subitem 50(6) has no application. Consequently, the pre rules apply to determine the new claim for unbilled income or consumable stores. 33. In order for the original 2002 law to apply to an existing claim for an unbilled income asset or consumable stores, the claim must 'relate to' the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity. The existing claim could have only been made through the application of subsection 701-55(6) of the original 2002 law. An amendment request to subsequently alter this claim would therefore come within the scope of paragraph 50(6)(a). Consequently, the pre rules apply to the adjusted claim for unbilled income or consumable stores. 34. Therefore, where an amendment request is made in respect of an existing claim made through the application of subsection 701-55(6) of the original 2002 law, the effect of subitem 50(5) and paragraph 50(6)(a) is that the resulting amended assessment, to the extent of the amended claim or particular, will be made under the pre rules. The pre rules will not apply to the other claims included in the assessment that satisfy the conditions in subitem 50(5). Consequently, the original 2002 law will continue to apply to those other claims. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Previously issued as TD 2014/D5

Appendix: 15. The Application rules in Part 4 of Schedule 3 are relevant to ascertaining whether the pre rules, interim rules [3] or prospective rules [4] apply in relation to an assessment of the head company of a consolidated group or multiple entry consolidated group in respect of an entity (the 'joining entity') when that entity joins the group. 16. Subitem 50(1) provides that: 17. Subitem 50(2) provides that the pre rules will apply to an assessment of the head company of a consolidated group for an income year in respect of a joining entity if the entity joined the group before 12 May 2010 (or where the arrangement under which the entity joined the group commenced before 10 February 2010). 18. There are two exceptions to the pre rules, namely the interim rules as provided for in subitem 50(3) and the original 2002 law as provided for in subitem 50(5). 19. The exceptions largely protect assessments served on or before 30 March 2011 from the effect of retrospective law changes made by Schedule 3. Where the exceptions apply to an assessment, and it is amended to alter an existing claim for a deduction the protection is removed to the extent of the altered claim. In this scenario, other existing claims for deductions in the assessment will continue to be protected notwithstanding that amendment. However, altering an existing claim for a deduction, in an assessment covered by paragraph 50(3)(a), on or after 29 June 2012 in order to give effect to the interim rules, will not remove the protection in respect of that claim. Conversely, where, in relation to a particular item, no claim has been made by 30 March 2011, subsequently amending an assessment on or after 29 June 2012 to make a claim for the first time will not benefit from protection. Also, if the altered claim is for a deduction not affected by Schedule 3 (for example, the claim is for a decline in value amount for a depreciating asset) the removal of the protection will make no difference. 20. Relevant to this Determination, subitem 50(5) states: 21. The term 'assessment' in relation to an income tax liability is defined by subsection 6(1) of the Income Tax Assessment Act 1936. Paragraph (a) of the definition provides that 'assessment' means the ascertainment of: 22. An assessment is made up of elements or particulars. A 'particular' is a specific or definite constituent element in the assessment of the taxable income (or that there is no taxable income) or tax payable thereon (or that there is no tax payable). [5] A claim for a deduction is an example of a particular or an element of an assessment 23. The extent to which the original 2002 law applies can be discerned when subitem 50(5) is considered in the context of subitems 50(1) and 50(2) such that subitem 50(5) confers the application of the original 2002 law to any particulars in respect of the joining entity that have been included in the head company's assessment for an income year. In order for the exception in subitem 50(5) to apply to that assessment, the particulars must include a claim that relates to the application of subsection 701-55(6) of the original 2002 law. 24. Subitem 50(6) states that subitem 50(5) does not apply if: 25. Subitem 50(6) does not state that subitem 50(5) does not apply 'to the extent' of the amended particular or similar. On a literal reading, if the conditions in subitem 50(6) were satisfied, subitem 50(5) would no longer apply to the relevant assessment for the income year and the pre rules would apply to all claims that relate to the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity. 26. Subitem 50(5) preserves the operation of the original 2002 law to claims made, that relate to the application of subsection 701-55(6) of the original 2002 law, provided they are not altered. As subitem 50(5) is interpreted as applying to any particulars in respect of the joining entity that have been included in the head company's assessment, it follows that subitem 50(6) also operates at the level of particulars. This interpretation ensures that subitem 50(6) interacts appropriately with subitem 50(5). 27. Paragraph 50(6)(a) applies if the amendment 'relates to' the application of subsection 701-55(6) of the original 2002 law. 28. The term 'relates to' denotes a connection or relationship between the amendment request and the application of subsection 701-55(6) of the original 2002 law. 'Related' is defined in the Macquarie Dictionary as 'to have reference (to) or to have some relation (to)'. The term 'relating to' has been considered by the courts and has been afforded a wide interpretation: Fountain v. Alexander (1982) 150 CLR 615 at 629; Colakovski v. Australian Telecommunications Corp (1991) 100 ALR 111. However, overall the term has been determined by the courts with reference to the statutory context and purpose: Butler v. Johnston (1984) 55 ALR 265 at 268; Hatfield v. Health Insurance Commission (1987) 77 ALR 103 at 106-7. 29. The purpose of paragraph 50(6)(a) can be seen as giving effect to the Government's statement in Media Release No. 59 of 25 November 2011 at paragraph 30, Table 2, Item 2 which states that where the original 2002 rules applied: 30. Further, paragraph 3.120 of the Explanatory Memorandum to Tax Laws Amendment (2012 Measures No. 2) Bill 2012, states: 31. Given that subitems 50(5) and 50(6) operate at the level of particulars and having regard to statements in the Explanatory Memorandum and the Media Release as cited above, it can be inferred that the purpose of paragraph 50(6)(a) is to enable claims for deductions such as those for unbilled income assets or consumable stores to be made without removing the application of the original 2002 law in respect of all other claims in the relevant assessment as a result of requesting an amendment to access such claims or to change the quantum of existing claims. 32. Therefore, where a head company requests an amendment to make a new claim for unbilled income or consumable stores, there is no existing claim in the head company's latest notice of assessment that can be said to 'relate to' the application of subsection 701-55(6) of the original 2002 law. In other words, there is no existing claim in the head company's latest notice of assessment to which subitem 50(5) can apply in the first instance. On the basis that subitem 50(5) does not apply in the first instance, subitem 50(6) has no application. Consequently, the pre rules apply to determine the new claim for unbilled income or consumable stores. 33. In order for the original 2002 law to apply to an existing claim for an unbilled income asset or consumable stores, the claim must 'relate to' the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity. The existing claim could have only been made through the application of subsection 701-55(6) of the original 2002 law. An amendment request to subsequently alter this claim would therefore come within the scope of paragraph 50(6)(a). Consequently, the pre rules apply to the adjusted claim for unbilled income or consumable stores. 34. Therefore, where an amendment request is made in respect of an existing claim made through the application of subsection 701-55(6) of the original 2002 law, the effect of subitem 50(5) and paragraph 50(6)(a) is that the resulting amended assessment, to the extent of the amended claim or particular, will be made under the pre rules. The pre rules will not apply to the other claims included in the assessment that satisfy the conditions in subitem 50(5). Consequently, the original 2002 law will continue to apply to those other claims. © AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Previously issued as TD 2014/D5


The pre rules, interim rules or prospective rules apply to an assessment of the head company of a consolidated group or MEC group for an income year in respect of an entity (the joining entity ) that becomes a member of the group at a time (the joining time ), in accordance with subitems (2), (3), (4) and (5). | Despite subitems (2) and (3), the original 2002 law applies, for the income year in respect of the joining entity, if the head company's latest notice of assessment, for the income year, that relates to the application of subsection 701-55(6) of the original 2002 law in respect of the joining entity, was served on the head company by the Commissioner before 12 May 2010 | ...claims will be allowed if covered by the specific deductions for consumables and certain category 1 rights to future income. | If the head company has claimed a deduction in an income year for an unbilled income asset or consumable stores, the pre-rules will apply and the deduction will be allowed. Similarly, if a head company that is covered by the pre-rules makes a request for an amendment to a prior year income tax return to claim a deduction for an unbilled income asset or consumable stores, the pre-rules (rather than the original 2002 law) will apply so that the deduction will be allowed.


Related rulings: TR 2006/10 TR 2011/5 TD 2014/D2 TD 2014/D3 TD 2014/22 TD 2014/24
Legislative references: Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 1 Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 2 Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 3 Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 Item 49 Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 Subitem 50(1) Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 Subitem 50(2) Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 Subitem 50(3) Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 Subitem 50(5) Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 Subitem 50(6) Tax Laws Amendment (2012 Measures No. 2) Act 2012 Sch 3 Pt 4 50(6)(a) ITAA 1936 6(1) ITAA 1997 8-1 ITAA 1997 701-55(6) ITAA 1997 701-55(5D) TAA 1953
Case references: Butler v. Johnston (1984) 55 ALR 265
Subject references: application rules consolidation interim rules joining entity joining time non-deductible right to future income assessment original 2002 law pre rules prospective rules rights to future income tax cost setting
Other references: Explanatory Memorandum to Tax Laws Amendment (2012 Measures No. 2) Bill 2012 Assistant Treasurer's Media Release No. 59 of 25 November 2011 Macquarie Dictionary 5th Edition