Taxation Determination TD 2004/64
Date of effect: 1 July 2002




Examples: Example 1: 5. Subco has a liability of $50,000 for the provision of long service leave in respect of employee A at the joining time. This amount is taken into account in working out the ACA for Subco. One year later the liability is discharged by Headco for $55,000. The additional $5,000 was due to extra employment services undertaken by employee A during that year. 6. As the additional $5,000 is an amount that accrued after the joining time, as a consequence of additional employment service that was undertaken after that point in time, CGT event L7 does not apply. Date of Effect 7. This Determination applies to a capital loss under CGT event L7 that arises on or after 1 July 2002 and before 10 February 2010. However, it does not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20). Commissioner of Taxation 3 November 2004 Previously issued as Draft TD 2004/D26



The number, subject heading, date of effect and paragraphs 1 to 4 of this document are a 'public ruling' for the purposes of Part IVAAA of the Taxation Administration Act 1953 and are legally binding on the Commissioner. [ Note: This is a consolidated version of this document. Refer to the ATO Legal Database (http://law.ato.gov.au) to check its currency and to view the details of all changes.] | 1. No. Section 104-530 (CGT event L7) of the Income Tax Assessment Act 1997 (ITAA 1997) does not apply to an amount of a liability that accrues after the time the relevant entity became a subsidiary member of a consolidated group. | 2. Under CGT event L7, if the amount of a liability taken into account in working out the allocable cost amount (ACA) for an entity that becomes a member of a consolidated group is later discharged for a different amount (the realised amount), the head company may make a capital loss. A capital loss will arise if the liability is discharged by the head company on or after 1 July 2002 and before 10 February 2010 and the ACA would have been greater had the realised amount been taken into account in working out the ACA. | 3. One of the conditions for CGT event L7 to happen is that the amount of a liability was taken into account in working out the ACA for an entity that becomes a subsidiary member of a consolidated group (see subsection 104-530(3)(a)). It is only the amount of a liability that accrued up to the time (the joining time) when the entity became a member of the group that can be taken into account in working out the ACA. Amounts of a liability that accrue after the joining time cannot be taken into account in the ACA calculation. Nor can CGT event L7 apply to such amounts. | 4. Whether or not an amount of a liability accrued after the joining time or was taken into account in working out the ACA for a subsidiary member are questions of fact the outcomes of which depend on the circumstances of each case.


Related rulings: TR 92/20
Legislative references: TAA 1953 Pt IVAAA ITAA 1997 104-530 ITAA 1997 104-530(3)(a)
Subject references: accounting liabilities CGT event CGT event L7 consolidation consolidation - capital gains tax discharge of liabilities liabilities