Taxation Determination TD 2004/65
Date of effect: 1 July 2002







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 the discharge of a liability that one member of a consolidated group owed, when it became a member of the group, to another member of that group (that is, an intra-group liability). | 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. In determining the income tax consequences of the discharge of an intra-group liability the single entity rule (the SER) in section 701-1 will apply. The effect of the SER is that an intra-group liability, the corresponding intra-group asset, and transactions or dealings between group members involving the liability or asset are not recognised for income tax purposes (see paragraphs 7 to 10 of TR 2004/11). | 4. Accordingly, from the head company's perspective, neither the intra-group liability nor its discharge, are recognised for income tax purposes. As a result, CGT event L7 will not apply to the discharge of the intra-group liability. | Date of Effect: 5. 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/D27


Related rulings: TR 92/20 TR 2004/11
Legislative references: TAA 1953 Pt IVAAA ITAA 1997 104-530 ITAA 1997 701-1
Subject references: accounting liabilities CGT event L7 CGT events consolidation consolidation - capital gains tax consolidation - liabilities discharge of liabilities