Income Tax Assessment Act 1997

s 701-63 — Right to future income and WIP amount asset

(5) A right to future income is a valuable right (including a contingent right) to receive an amount if: (a) the valuable right forms part of a contract or agreement; and (b) the * market value of the valuable right (taking into account all the obligations and conditions relating to the right) is greater than nil; and (c) the valuable right is neither a * Division 230 financial arrangement nor a part of a Division 230 financial arrangement; and (d) it is reasonable to expect that an amount attributable to the right will be included in the assessable income of any entity at a later time. (6) WIP amount asset means an asset that is in respect of work (but not goods) that has been partially performed by a recipient mentioned in paragraph 25 ‑ 95(3)(b) for a third entity but not yet completed to the stage where a recoverable debt has arisen in respect of the completion or partial completion of the work.

Amendment history: Inserted by No 99 of 2012, effective s 4 and Sch 3: 29 June 2012 (s 2(1) items 1, 7–10) Sch 1 (items 10, 11, 23): 30 June 2012 (s 2(1) item 3) Sch 2 (items 1–4, 6): 26 Mar 2009 (s 2(1) item 6) | Repealed and substituted by No 99 of 2012, effective s 4 and Sch 3: 29 June 2012 (s 2(1) items 1, 7–10) Sch 1 (items 10, 11, 23): 30 June 2012 (s 2(1) item 3) Sch 2 (items 1–4, 6): 26 Mar 2009 (s 2(1) item 6)

s 701-65 — Net income and losses for trusts and partnerships

Net income of partnerships and trusts (1) If: (a) another provision of this Division applies for the purpose of: (i) working out the amount of the entity’s liability (if any) for income tax calculated by reference to an income year; or (ii) working out the amount of the entity’s taxable income for an income year; and (b) the entity is a trust or partnership; the provision instead applies in a corresponding way for the purpose of working out the amount of the entity’s net income, as defined in the Income Tax Assessment Act 1936 , (if any) for the income year. Note: Subsection 701 ‑ 30(3) requires non ‑ membership periods mentioned in that subsection to be treated as the start and end of an income year. This section would therefore also apply to those periods. Partnership losses (2) If: (a) another provision of this Division applies for the purpose of working out the amount of the entity’s loss (if any) of a particular * sort for an income year; and (b) the entity is a partnership; the provision instead applies in a corresponding way for the purpose of working out the amount of an entity’s partnership loss, as defined in section 90 of the Income Tax Assessment Act 1936 , (if any) for the income year. Note: The provision applies normally to a trust, as it can have a loss of any sort worked out in the same way as a loss of the same sort for an entity of another kind.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 701-67 — Assets in this Part are CGT assets, etc.

This Part applies to an asset only if the asset is one or more of the following: (a) a * CGT asset; (b) a * revenue asset; (c) a * depreciating asset; (d) * trading stock; (e) a thing that is or is part of a * Division 230 financial arrangement.

Amendment history: Inserted by No 99 of 2012, effective s 4 and Sch 3: 29 June 2012 (s 2(1) items 1, 7–10) Sch 1 (items 10, 11, 23): 30 June 2012 (s 2(1) item 3) Sch 2 (items 1–4, 6): 26 Mar 2009 (s 2(1) item 6)

s 701-70 — Adjustments to taxable income where identities of parties to arrangement merge on joining group

Section applies to certain arrangements (1) This section applies for the head company core purposes and the entity core purposes if, just before the time (the joining time ) when the entity becomes a * subsidiary member of the group, an * arrangement is in force under which: (a) expenditure is to be, or has been, incurred in return for the doing of some thing; and (b) the persons incurring the expenditure and * deriving the corresponding amount (each of which is a combining entity ) are the entity and either: (i) another entity that became a subsidiary member at the same time; or (ii) the * head company. Note 1: If expenditure incurred under an arrangement consists of a payment of loan interest or a payment of a similar kind, the expenditure would be incurred in return for the making available or continued making available of the loan principal, or other amount of a similar kind, under the arrangement. Note 2: If expenditure incurred under an arrangement consists of a payment of rent, a lease payment or a payment of a similar kind, the expenditure would be incurred in return for the making available or continued making available of the thing rented or leased, or other thing of a similar kind, under the arrangement. Note 3: If expenditure incurred under an arrangement consists of a payment of an insurance premium or a payment of a similar kind, the expenditure would be incurred in return for the provision or continued provision of insurance against the risk concerned, or of a thing of a similar kind, under the arrangement. Object (2) The object of this section is to align the income tax position of the combining entities at the joining time, because after that time they lose their separate tax identities under the single entity rule in subsection 701 ‑ 1(1) and this would preserve any imbalance. Adjustment for disproportionate deductibility (3) If the total of a combining entity’s deductions that are allowable for: (a) the following income year (the joining adjustment year ): (i) if the combining entity is the * head company and the joining time occurs at the start of an income year—the income year before that income year; (ii) if the combining entity is the head company and subparagraph (i) does not apply—the income year in which the joining time occurs; (iii) in any other case—the income year that ends, or, if section 701 ‑ 30 applies, the income year that is taken by subsection (3) of that section to end, at the joining time; and (b) all earlier income years; is not equal to the amount worked out under subsection (4), then: (c) if the total is less—the entity is entitled to deduct the difference for the joining adjustment year; and (d) if it is more—the entity’s assessable income for the joining adjustment year includes the difference. Pre ‑ joining time proportion of total arrangement deductions (4) The amount is worked out using the formula: where: pre ‑ joining time services proportion means the proportion of all things to be done under the arrangement in return for the incurring of the expenditure represented by those things that were done before the joining time. total arrangement deductions means the total of the deductions that, ignoring this Part (other than subsection (7) of this section), would be allowable for expenditure incurred by the combining entity under the arrangement for all income years. Adjustment for disproportionate assessability (5) If the total of the amounts included in a combining entity’s assessable income in respect of amounts * derived under the arrangement for the joining adjustment year and all earlier income years is not equal to the amount worked out under subsection (6): (a) if the total is less—the entity’s assessable income for the joining adjustment year includes the difference; and (b) if it is more—the entity is entitled to deduct the difference for the joining adjustment year. Pre ‑ joining time proportion of total arrangement assessable income (6) The amount is worked out using the formula: where: pre ‑ joining time services proportion has the same meaning as in subsection (4). total arrangement assessable income means the total of the amounts that, ignoring this Part (other than subsection (7) of this section), would be included in the combining entity’s assessable income for amounts * derived by it under the arrangement for all income years. Modified application of section if combining entities previously members of same group (7) If the combining entities were * members of the same * consolidated group (whether or not the group to which this section applies) on one or more previous occasions, this section applies in relation to the entities as if: (a) the only things to be done under the arrangement in return for the incurring of the expenditure were those things to be done after the entities ceased to be members of the same group on the previous occasion or the last of the previous occasions; and (b) the only deductions allowable to an entity for expenditure incurred by it under the arrangement, and the only amounts included in an entity’s assessable income in respect of amounts * derived under the arrangement, were: (i) if the entity was the * head company of the consolidated group of which the combining entities were members on the previous occasion or last of the previous occasions—those for the income year, in which the previous occasion or the last of the previous occasions occurred, that are attributable to the period after that occasion and those for all later income years; and (ii) in any other case—those for the income year that started, or, if section 701 ‑ 30 applies, the income year that is taken by subsection (3) of that section to have started, when the entity ceased to be a * subsidiary member of the group on the previous occasion or the last of the previous occasions and those for all later income years.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20)

s 701-75 — Adjustments to taxable income where identities of parties to arrangement re ‑ emerge on leaving group

Section applies to certain arrangements (1) This section applies for the head company core purposes and the entity core purposes if the entity ceases to be a * subsidiary member of the group and, just before the time (the leaving time ) when it does so, an * arrangement is in force under which: (a) expenditure is to be, or has been, incurred in return for the doing of some thing; and (b) the persons incurring the expenditure and * deriving the corresponding amount (each of which is a separating entity ) are the entity and either: (i) another entity that ceases to be a subsidiary member at the same time; or (ii) the * head company. Note: The notes to subsection 701 ‑ 70(1) on the application of that subsection to expenditure under certain kinds of arrangements are equally applicable for the purposes of this subsection. Object (2) The object of this section is to align the income tax position of the separating entities at the leaving time, because from that time they have separate tax identities as a result of the single entity rule in subsection 701 ‑ 1(1) ceasing to apply, and this may create an imbalance. Adjustment for disproportionate deductibility (3) If the total of the deductions that are or will be allowable for expenditure incurred by the separating entity under the arrangement for: (a) the following income year (the leaving adjustment year ): (i) if the separating entity is the * head company—the income year in which the leaving time occurs; (ii) in any other case—the income year that starts, or, if section 701 ‑ 30 applies, the income year that is taken by subsection (3) of that section to start, at the leaving time; and (b) all later income years; is not equal to the amount worked out under subsection (4), the deductions are adjusted so that they do equal the amount. Post ‑ leaving time proportion of total arrangement deductions (4) The amount is worked out using the formula: where: post ‑ leaving time services proportion means the proportion of all things to be done under the arrangement in return for the incurring of the expenditure represented by those things that are to be done after the leaving time. total arrangement deductions means the total of the deductions that, ignoring this Part, would be allowable for expenditure incurred by the separating entity under the arrangement for all income years. Adjustment for disproportionate assessability (5) If the total of the amounts that are or will be included in its assessable income in respect of amounts * derived under the arrangement for the leaving adjustment year and all later income years is not equal to the amount worked out under subsection (6), the amounts that are or will be included in its assessable income are adjusted so that they do equal the amount worked out under subsection (6). Post ‑ leaving time proportion of total arrangement assessable income (6) The amount is worked out using the formula: where: post ‑ leaving time services proportion has the same meaning as in subsection (4). total arrangement assessable income means the total of the amounts that, ignoring this Part, would be included in the separating entity’s assessable income for amounts * derived by it under the arrangement for all income years.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20)

s 701-80 — Accelerated depreciation

(1) This section has effect for the head company core purposes when the entity becomes a * subsidiary member of the group. Object (2) The object of this section is to preserve any entitlement to accelerated depreciation for assets that become those of the * head company because subsection 701 ‑ 1(1) (the single entity rule) applies when the entity becomes a * subsidiary member of the group. This is only to apply where the asset’s * tax cost setting amount is not more than the entity’s * terminating value for the asset. Section applies to certain depreciating assets (3) This section applies if: (a) a * depreciating asset to which Division 40 applies becomes that of the * head company because subsection 701 ‑ 1(1) (the single entity rule) applies when the entity becomes a * subsidiary member of the group; and (b) just before the entity became a subsidiary member, subsection 40 ‑ 10(3) or 40 ‑ 12(3) of the Income Tax (Transitional Provisions) Act 1997 applied for the purpose of the entity working out the asset’s decline in value under Division 40; and Note: The effect of those subsections was to preserve an entitlement to accelerated depreciation. (c) the * tax cost setting amount that applies in relation to the asset for the purposes of section 701 ‑ 10 when it becomes an asset of the head company is not more than the entity’s * terminating value for the asset. Preservation of accelerated depreciation (4) While the asset is held by the * head company under subsection 701 ‑ 1(1) (the single entity rule), the decline in its value under Division 40 is worked out by replacing the component in the formula in subsection 40 ‑ 70(1) or 40 ‑ 75(1) that includes the asset’s * effective life with the rate that would apply under subsection 42 ‑ 160(1) or 42 ‑ 165(1) of this Act if it had not been amended by the New Business Tax System (Capital Allowances) Act 2001 .

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 107 of 2003, effective Sch 6: 1 July 2003 (s 2(1) item 3) Sch 7 (items 6–8): 30 June 2003 (s 2(1) item 5) Sch 7 (item 15): 17 Dec 2003 (s 2(1) item 7) Remainder: 21 Oct 2003 (s 2(1) items 1, 2, 4, 6, 8)

s 701-85 — Other exceptions etc. to the rules

The operation of each provision of this Division is subject to any provision of this Act that so requires, either expressly or impliedly. Note: An example of such a provision is Division 707 (about the transfer of certain losses to the head company of a consolidated group). That Division modifies the effect that the inheritance of history rule in section 701 ‑ 5 would otherwise have.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 703-1 — What this Division is about

A consolidated group and a consolidatable group each consists of a head company and all the companies, trusts and partnerships that: (a) are resident in Australia; and (b) are wholly ‑ owned subsidiaries of the head company (either directly or through other companies, trusts and partnerships). A consolidatable group becomes consolidated at a time chosen by the company that was the head company at the time. Table of sections Basic concepts 703 ‑ 5 What is a consolidated group ? 703 ‑ 10 What is a consolidatable group ? 703 ‑ 15 Members of a consolidated group or consolidatable group 703 ‑ 20 Certain entities that cannot be members of a consolidated group or consolidatable group 703 ‑ 25 Australian residence requirements for trusts 703 ‑ 30 When is one entity a wholly ‑ owned subsidiary of another? 703 ‑ 33 Transfer time for sale of shares in company 703 ‑ 35 Treating entities as wholly ‑ owned subsidiaries by disregarding employee shares 703 ‑ 37 Disregarding certain preference shares following an ADI restructure 703 ‑ 40 Treating entities held through non ‑ fixed trusts as wholly ‑ owned subsidiaries 703 ‑ 45 Subsidiary members or nominees interposed between the head company and a subsidiary member of a consolidated group or a consolidatable group Choice to consolidate a consolidatable group 703 ‑ 50 Choice to consolidate a consolidatable group Consolidated group created when MEC group ceases to exist 703 ‑ 55 Creating consolidated groups from certain MEC groups Notice of events affecting consolidated group 703 ‑ 58 Notice of choice to consolidate 703 ‑ 60 Notice of events affecting consolidated group Effects of choice to continue group after shelf company becomes new head company 703 ‑ 65 Application 703 ‑ 70 Consolidated group continues in existence with interposed company as head company and original entity as a subsidiary member 703 ‑ 75 Interposed company treated as substituted for original entity at all times before the completion time 703 ‑ 80 Effects on the original entity’s tax position

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 703-5 — What is a consolidated group ?

(1) A consolidated group comes into existence: (a) on the day specified in a choice by a company under section 703 ‑ 50 as the day on and after which a * consolidatable group is taken to be consolidated; or (b) as described in section 703 ‑ 55 (about creating a consolidated group from a * MEC group). Note: The day specified in a choice under section 703 ‑ 50 as the day on and after which a consolidatable group is taken to be consolidated may be a day before the choice is made. (2) The consolidated group continues to exist until the * head company of the group: (a) ceases to be a head company; or (b) becomes a member of a * MEC group. The consolidated group ceases to exist when one of those events happens to the head company. Note: The group does not cease to exist in some cases where a shelf company is interposed between the head company and its former members: see subsection 615 ‑ 30(2) and section 703 ‑ 70. (3) At any time while it is in existence, the consolidated group consists of the * head company and all of the * subsidiary members (if any) of the group at the time. Note: A consolidated group continues to exist despite one or more entities ceasing to be subsidiary members of the group or becoming subsidiaries of the group, as long as the events described in subsection (2) do not happen to the head company. Thus a consolidated group may come to consist of a head company alone at various times.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 133 of 2014, effective s 4, Sch 1 (items 1, 4–29, 37–40) and Sch 2 (items 1–3, 5): 12 Dec 2014 (s 2(1) items 1, 2)

s 703-10 — What is a consolidatable group ?

(1) A consolidatable group consists of: (a) a single * head company; and (b) all the * subsidiary members of the group. (2) To avoid doubt, a consolidatable group cannot consist of a * head company alone.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 703-15 — Members of a consolidated group or consolidatable group

(1) An entity is a member of a * consolidated group or * consolidatable group while the entity is: (a) the * head company of the group; or (b) a * subsidiary member of the group. (2) At a particular time in an income year, an entity is: (a) a head company if all the requirements in item 1 of the table are met in relation to the entity; or (b) a subsidiary member of a * consolidated group or * consolidatable group if all the requirements in item 2 of the table are met in relation to the entity: Head companies and subsidiary members of groups Column 1 Entity’s role in relation to group Column 2 Income tax treatment requirements Column 3 Australian residence requirements Column 4 Ownership requirements 1 Head company The entity must be a company (but not one covered by section 703 ‑ 20) that has all or some of its taxable income (if any) taxed at a rate that is or equals the * corporate tax rate The entity must be an Australian resident (but not a * prescribed dual resident) The entity must not be a * wholly ‑ owned subsidiary of another entity that meets the requirements in columns 2 and 3 of this item or, if it is, it must not be a subsidiary member of a * consolidatable group or * consolidated group 2 Subsidiary member The requirements are that: (a) the entity must be a company, trust or partnership (but not one covered by section 703 ‑ 20); and (b) if the entity is a company—all or some of its taxable income (if any) must be taxable apart from this Part at a rate that is or equals the * corporate tax rate; and (c) the entity must not be a non ‑ profit company (as defined in the Income Tax Rates Act 1986 ) The entity must: (a) be an Australian resident (but not a * prescribed dual resident), if it is a company; or (b) comply with section 703 ‑ 25, if it is a trust; or (c) be a partnership The entity must be a * wholly ‑ owned subsidiary of the head company of the group and, if there are interposed between them any entities, the set of requirements in section 703 ‑ 45, section 701C ‑ 10 of the Income Tax (Transitional Provisions) Act 1997 or section 701C ‑ 15 of that Act must be met

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 97 of 2008, effective Sch 1 (items 3–12) and Sch 3 (items 44–173, 189): 3 Oct 2008 (s 2(1) items 2, 3–5)

s 703-20 — Certain entities that cannot be members of a consolidated group or consolidatable group

(1) The object of this section is to specify certain entities that cannot be * members of a * consolidated group because of the way their income is treated for income tax purposes. (2) An entity of a kind specified in an item of the table cannot be a * member of a * consolidated group or a * consolidatable group at a time in an income year if the conditions specified in the item exist: Certain entities that cannot be members of a consolidated or consolidatable group Item An entity of this kind: Cannot be a member of a consolidated group or consolidatable group if: 1 An entity of any kind At the time, the total * ordinary income and * statutory income of the entity is exempt from income tax under Division 50 2 A company The company is a recognised medium credit union (as defined in section 6H of the Income Tax Assessment Act 1936 ) for the income year 3 A company The company: (a) is an approved credit union for the income year for the purposes of section 23G of the Income Tax Assessment Act 1936 ; and (b) is not a recognised medium credit union (as defined in section 6H of that Act) or a recognised large credit union (as defined in that section) for the income year 4 A company The company is a * CCIV at any time during the income year 5 A company The company is a * PDF at the end of the income year 7 A trust The trust is: (a) a * complying superannuation entity for the income year; or (b) a * non ‑ complying approved deposit fund or a * non ‑ complying superannuation fund for the income year 8 A trust The trust is a * CCIV sub ‑ fund trust Note: A subsidiary of a life insurance company cannot be a member of a consolidated group or consolidatable group in certain circumstances: see section 713 ‑ 510. (3) Item 8 of the table in subsection (2) of this section has effect despite section 713 ‑ 130 (which enables a public trading trust to form a consolidated group).

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 9 of 2007, effective Schedule 1 (items 1, 2, 5–17, 24(1)), Schedule 2 (items 1, 2), Schedule 3, Schedule 5 (items 6–8, 36(1)) and Schedule 10: Royal Assent | Amended by No 136 of 2012, effective Sch 7 (items 7–9): 22 Sept 2012 (s 2(1) item 37) | Amended by No 8 of 2022, effective sch 5 (items 1-4, 8-14): 1 July 2022 (s 2(1) item 4) sch 5 (items 15-19): repealed before commencing (s 2(1) item 5) sch 6 (items 1-22, 24), sch 7, sch 8 (items 33, 34), sch 10: 1 Apr 2022 (s 2(1) items 6-8, 10, 14)

s 703-25 — Australian residence requirements for trusts

A trust described in an item of the table must meet the requirements specified in the item to be able to be a * subsidiary member of a * consolidated group or a * consolidatable group at a time in an income year: Australian residence requirements for trusts Item A trust of this kind: Can be a member of a consolidated group or consolidatable group only if these requirements are met: 1 A trust (except a unit trust) The trust must be a resident trust estate for the income year for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 2 A unit trust (except a * public trading trust for the income year) The trust must be: (a) a resident trust estate for the income year for the purposes of Division 6 of Part III of the Income Tax Assessment Act 1936 ; and (b) a * resident trust for CGT purposes for the income year 3 A * public trading trust for the income year The trust must be a * resident unit trust for the income year

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 53 of 2016, effective Sch 1 (item 1), Sch 2, Sch 3 (items 2–4), Sch 4 (items 1–5), Sch 5 (items 2, 29–67, 75), Sch 6 (items 21–34), Sch 8 (item 1) and Sch 9: 5 May 2016 (s 2(1) items 2, 4)

s 703-30 — When is one entity a wholly ‑ owned subsidiary of another?

(1) One entity (the subsidiary entity ) is a wholly ‑ owned subsidiary of another entity (the holding entity ) if all the * membership interests in the subsidiary entity are beneficially owned by: (a) the holding entity; or (b) one or more wholly ‑ owned subsidiaries of the holding entity; or (c) the holding entity and one or more wholly ‑ owned subsidiaries of the holding entity. (2) An entity (other than the subsidiary entity) is a wholly ‑ owned subsidiary of the holding entity if, and only if: (a) it is a wholly ‑ owned subsidiary of the holding entity; or (b) it is a wholly ‑ owned subsidiary of a wholly ‑ owned subsidiary of the holding entity; because of any other application or applications of this section. Note: This Part also operates in some cases as if an entity were a wholly ‑ owned subsidiary of another entity, even though the entity is not covered by the definition in this section because of: (a) ownership of shares under certain arrangements for employee shareholding (see section 703 ‑ 35); or (aa) ownership of certain preference shares following an ADI restructure (see section 703 ‑ 37); or (b) interposed trusts that are not fixed trusts (see section 703 ‑ 40). (3) For the purposes of this section, one entity is not prevented from being the beneficial owner of a * membership interest in another entity merely because the first entity is or becomes: (a) a Chapter 5 body corporate within the meaning of the Corporations Act 2001 ; or (b) an entity with a status under a * foreign law similar to the status of a Chapter 5 body corporate under the Corporations Act 2001 .

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | Amended by No 117 of 2007, effective 28 June 2007 | Amended by No 11 of 2016, effective Sch 2 (items 274–277): 1 Mar 2017 (s 2(1) item 5)

s 703-33 — Transfer time for sale of shares in company

(1) This section applies if: (a) under a contract: (i) a person (the seller ) stops being entitled to be registered as the holder of a * share in a company at a time (the transfer time ); and (ii) another person (the buyer ) becomes entitled to be registered as the holder of the share in the company at the transfer time; and (b) as a result of the contract, the seller stops being the beneficial owner of the share, and the buyer becomes the beneficial owner of the share; and (c) the seller and the buyer dealt with each other at * arm’s length in relation to the contract; and (d) the seller and the buyer were not * associates of one another at any time during the period: (i) starting when the contract was entered into; and (ii) ending at the transfer time. (2) For the purposes of subsection 703 ‑ 30(1): (a) the seller is taken to have stopped being the beneficial owner of the share at the transfer time; and (b) the buyer is taken to have become the beneficial owner of the share at the transfer time.

Amendment history: Inserted by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23)

s 703-35 — Treating entities as wholly ‑ owned subsidiaries by disregarding employee shares

(1) The object of this section is to ensure that an entity (the first entity ) is not prevented from being a * subsidiary member of a * consolidated group or * consolidatable group just because there are minor holdings of * membership interests in an entity (the employee share scheme entity ) issued under * arrangements for employee shareholdings. (It does not matter whether the employee share scheme entity is the first entity or is interposed between the first entity and a * member of the group.) Note: A company that is prevented from being a subsidiary member of a consolidated group may be a head company (so there could be 2 consolidated or consolidatable groups, instead of the one that this section ensures exists). (2) This Part (except Division 719) operates as if an entity that meets the requirement of subsection (3) at a particular time were a * wholly ‑ owned subsidiary of an entity (the holding entity ) at the time. (3) The entity must be one that would be a * wholly ‑ owned subsidiary of the holding entity at the time if the * membership interests in the entity that are to be disregarded under subsection (4) did not exist. (4) Disregard: (a) each of the * shares described in subsection (5) if the total number of those shares is not more than 1% of the number of ordinary shares in the company; and (b) each of the * membership interests in an entity described in subsection (5) if the total number of those membership interests is not more than 1% of the number of membership interests of that kind in the entity. (5) A * share or * membership interest in a company may be disregarded under subsection (4) if: (a) the entity who holds the beneficial interest in the share or membership interest acquired that beneficial interest: (i) under an * employee share scheme; or (ii) by exercising a right, a beneficial interest in which was acquired under an employee share scheme; and (b) paragraphs 83A ‑ 105(1)(a) and (b) and subsection 83A ‑ 105(2) apply to the beneficial interest acquired under the scheme; and (c) in the case of a membership interest—the interest is part of a stapled security.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 56 of 2007, effective 12 Apr 2007 | Amended by No 133 of 2009, effective Schedule 1 (items 1, 21–76, 86, 87): 14 Dec 2009 Schedule 2 (items 1–13, 15) and Schedule 3 (items 28–40, 44, 45): Royal Assent

s 703-37 — Disregarding certain preference shares following an ADI restructure

(1) The object of this section is to ensure that, following an * ADI restructure to which Part 4A of the Financial Sector (Transfer and Restructure) Act 1999 applies, a body corporate is not prevented from being a * subsidiary member of a * consolidated group or * consolidatable group just because the body (or another body corporate) has issued, or issues, certain preference * shares. (2) This Part (except Division 719) operates as if a body corporate that meets the requirement of subsection (3) at a particular time were a * wholly ‑ owned subsidiary of another body corporate (the holding body ) at the time. (3) The body corporate (the preference ‑ share issuing body ) must be one that would be a * wholly ‑ owned subsidiary of the holding body at the time if the * shares in the preference share ‑ issuing body that are to be disregarded under subsection (4) did not exist. (4) Disregard a * share in the preference ‑ share issuing body if: (a) a restructure instrument under Part 4A of the Financial Sector (Transfer and Restructure) Act 1999 is in force in relation to a non ‑ operating holding company within the meaning of that Act; and (b) because of the restructure to which the instrument relates, an * ADI becomes a subsidiary (within the meaning of that Act) of the non ‑ operating holding company; and (c) the preference share ‑ issuing body is: (i) the ADI; or (ii) part of an extended licensed entity (within the meaning of the * prudential standards) that includes the ADI; and (d) the shares are covered by subsection (5). (5) A * share is covered by this subsection if: (a) the share is a preference share; and (b) any * return on the share is fixed at the time of issue by reference to the amount subscribed; and (c) the share is not a * voting share; and (d) either: (i) the share is Tier 1 capital (within the meaning of the * prudential standards); or (ii) the share would be Tier 1 capital (within the meaning of the prudential standards) were it not for a limit, imposed by those standards, on the proportion of Tier 1 capital that can be made up of such shares. (6) Paragraph (5)(a) covers a preference share if it is issued: (a) by itself; or (b) in combination with one or more * schemes that are * related schemes in relation to a scheme under which a preference share is issued. (7) If subsection (5) has covered a * share, but would (apart from this subsection) stop covering the share from a particular time, then for a period of 180 days after that time the subsection is taken to continue to cover the share.

Amendment history: Inserted by No 117 of 2007, effective 28 June 2007 | Amended by No 10 of 2018, effective Sch 7 (items 4–11): 5 Mar 2018 (s 2(1) item 2)

s 703-40 — Treating entities held through non ‑ fixed trusts as wholly ‑ owned subsidiaries

(1) This section operates to ensure that an entity (the test entity ) is not prevented from being a * subsidiary member of a * consolidated group or * consolidatable group just because there is a trust that is not a * fixed trust interposed between the test entity and the * head company of the group. (2) This Part (except Division 719) operates as if the test entity were a * wholly ‑ owned subsidiary of the * head company if the test entity would have been a wholly ‑ owned subsidiary of the head company had the interposed trust been a * fixed trust and all its objects been beneficiaries.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 703-45 — Subsidiary members or nominees interposed between the head company and a subsidiary member of a consolidated group or a consolidatable group

(1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703 ‑ 15(2), a set of requirements that must be met for an entity (the test entity ) to be a * subsidiary member of a * consolidated group or a * consolidatable group at a particular time (the test time ). (2) At the test time, each of the interposed entities must either: (a) be a * subsidiary member of the group; or (b) hold * membership interests in: (i) the test entity; or (ii) a subsidiary member of the group interposed between the * head company of the group and the test entity; only as a nominee of one or more entities each of which is a * member of the group.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Repealed and substituted by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23)

s 703-50 — Choice to consolidate a consolidatable group

(1) A company may make a choice in writing that a * consolidatable group is taken to be consolidated on and after a day that is specified in the choice and is after 30 June 2002, if the company was the * head company of the group on the day specified. Note: The head company of the group must give the Commissioner a notice in the approved form containing information about the group (see sections 703 ‑ 58 and 703 ‑ 60). Choice is irrevocable (2) The choice cannot be revoked, and the specification of the day cannot be amended, after the choice is made under subsection (1). (3) The choice can be made no later than: (a) if the company is required to give the Commissioner its * income tax return for the income year during which the specified day mentioned in subsection (1) occurs—the day on which the company gives the Commissioner that income tax return; or (b) otherwise—the last day in the period within which the company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return. Choice has no effect after consolidated group ceases to exist (4) The choice does not have effect after the * consolidated group that came into existence because of the choice ceases to exist. To avoid doubt, this subsection does not prevent the choice from: (a) being made by the company at a time when it is not a head company; or (b) having effect in relation to a time before the consolidated group ceased to exist, even if that time is before the choice is made. Choice does not have effect if company is a member of a MEC group (7) The choice does not have effect (and is taken not to have had effect) if, on the day specified, the company was a member of a * MEC group.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 14 of 2012, effective Sch 2 (items 11–16): never commenced (s 2(1) item 4) Sch 3 (items 7–85, 91): 1 July 2012 (s 2(1) items 5, 7) | Amended by No 18 of 2012, effective Sch 5 (items 2–5) and Sch 6 (item 8): 1 July 2012 (s 2(1) items 11, 14) | Amended by No 96 of 2014, effective Sch 1 (items 14–45, 122–124), Sch 2 (items 1, 14–40, 42, 43) and Sch 3–5: 30 Sept 2014 (s 2(1) item 2) Sch 8 (items 15–22, 26) and Sch 9 (items 21, 22, 24): 31 Dec 2016 (s 2(1) items 7, 9) | Amended by No 43 of 2019, effective Sch 2 (items 79–92): 1 July 2019 (s 2(1) item 1)

s 703-55 — Creating consolidated groups from certain MEC groups

(1) A * consolidated group comes into existence at the time a * MEC group ceases to exist if: (a) the MEC group included only one * eligible tier ‑ 1 company just before the time; and (b) the MEC group ceases to exist only because the company ceases to be an eligible tier ‑ 1 company; and (c) the company is a * head company as defined in section 703 ‑ 15 at the time. (2) To avoid doubt, the * consolidated group consists at the time of: (a) the company (as the * head company of the consolidated group); and (b) every entity (if any) that was a * subsidiary member of the * MEC group just before that time (as a subsidiary member of the consolidated group).

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 703-58 — Notice of choice to consolidate

(1) If a * consolidated group comes into existence on the day specified in a choice under section 703 ‑ 50, the * head company of the group must give the Commissioner a notice in the * approved form containing the following information: (a) the identity of the head company; (b) the day specified in the choice on which the * consolidatable group is taken to be consolidated; (c) the identity of each * subsidiary member of the group on that day; (d) the identity of each entity that was a subsidiary member of the group on that day but was not such a subsidiary member when the notice is given; (e) the identity of each entity that was not a subsidiary member of the group on that day but was such a subsidiary member when the notice is given; (f) the identity of each entity that became a subsidiary member of the group after that day but was not such a subsidiary member when the notice is given. (2) The notice must be given no later than: (a) if the * head company is required to give the Commissioner its * income tax return for the income year during which that day occurs—the day on which the company gives the Commissioner that income tax return; or (b) otherwise—the last day in the period within which the head company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

Amendment history: Inserted by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 703-60 — Notice of events affecting consolidated group

(1) Within 28 days of an event described in an item of the table, the entity described in column 3 of the item must give the Commissioner notice in the * approved form of the event. Notice of events Column 1 Item Column 2 If this event happens: Column 3 Notice must be given by: 1 An entity becomes a * member of a * consolidated group The * head company of the consolidated group 2 An entity ceases to be a * subsidiary member of a * consolidated group The * head company of the group, or the person who was its public officer just before it ceased to exist if the former subsidiary member ceases to be a * member of the group because the head company ceases to exist 3 A * consolidated group ceases to exist The company that was the * head company of the group, or the person who was its public officer just before it ceased to exist if it ceases to be the head company of the group because it ceases to exist (2) Despite subsection (1), if: (a) an event described in subsection (1) happens in relation to a * consolidated group that comes into existence on the day specified in a choice under section 703 ‑ 50; and (b) the event happens before the relevant notice is given to the Commissioner under section 703 ‑ 58 (notice of choice to consolidate); the * head company of the consolidated group must give the Commissioner notice in the * approved form of the event. (2A) The notice must be given no later than: (a) if the * head company is required to give the Commissioner its * income tax return for the income year during which that day occurs—the day on which the company gives the Commissioner that income tax return; or (b) otherwise—the last day in the period within which the head company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return. (3) Despite subsection (1), if: (a) an event described in subsection (1) happens in relation to a * consolidated group that comes into existence at a time under subsection 703 ‑ 55(1) because a * MEC group ceased to exist at that time; and (b) the * MEC group came into existence under paragraph 719 ‑ 5(1)(a) because a choice under section 719 ‑ 50 is made after that time; and (c) the event happens before the relevant notice is given to the Commissioner under section 719 ‑ 76 (notice of choice to consolidate); the * head company of the consolidated group must give the Commissioner notice in the * approved form of the event. (4) The notice must be given no later than: (a) if the * head company is required to give the Commissioner its * income tax return for the income year during which that day occurs—the day on which the company gives the Commissioner that income tax return; or (b) otherwise—the last day in the period within which the head company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 703-65 — Application

Sections 703 ‑ 70 to 703 ‑ 80 set out the effects if a company (the interposed company ) chooses under subsection 615 ‑ 30(2) that a * consolidated group is to continue in existence at and after the time referred to in that subsection as the completion time. Note: The choice is one of the conditions for a compulsory roll ‑ over under Division 615 on an exchange of shares in the head company of a consolidated group for shares in the interposed company.

Amendment history: Inserted by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 133 of 2014, effective s 4, Sch 1 (items 1, 4–29, 37–40) and Sch 2 (items 1–3, 5): 12 Dec 2014 (s 2(1) items 1, 2)

s 703-70 — Consolidated group continues in existence with interposed company as head company and original entity as a subsidiary member

(1) The * consolidated group is taken not to have ceased to exist under subsection 703 ‑ 5(2) because the company referred to in subsection 615 ‑ 30(2) as the original entity ceases to be the * head company of the group. (2) To avoid doubt, the interposed company is taken to have become the * head company of the * consolidated group at the completion time, and the original entity is taken to have ceased to be the head company at that time. Note: A further result is that the original entity is taken to have become a subsidiary member of the group at that time. Section 703 ‑ 80 deals with the original entity’s tax position for the income year that includes the completion time. (3) A provision of this Part that applies on an entity becoming a * subsidiary member of a * consolidated group does not apply to an entity being taken to have become such a member as a result of this section, unless the provision is expressed to apply despite this subsection. Note: An example of the effect of this subsection is that there is no resetting under section 701 ‑ 10 of the tax cost of assets of the original entity that become assets of the interposed company because of subsection 701 ‑ 1(1) (the single entity rule). (4) To avoid doubt, subsection (3) does not affect the application of subsection 701 ‑ 1(1) (the single entity rule).

Amendment history: Inserted by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 133 of 2014, effective s 4, Sch 1 (items 1, 4–29, 37–40) and Sch 2 (items 1–3, 5): 12 Dec 2014 (s 2(1) items 1, 2)

s 703-75 — Interposed company treated as substituted for original entity at all times before the completion time

(1) Everything that happened in relation to the original entity before the completion time: (a) is taken to have happened in relation to the interposed company instead of in relation to the original entity; and (b) is taken to have happened in relation to the interposed company instead of what would (apart from this section) be taken to have happened in relation to the interposed company before that time; just as if, at all times before the completion time: (c) the interposed company had been the original entity; and (d) the original entity had been the interposed company. Note: This section treats the original entity and the interposed company as having in effect exchanged identities throughout the period before the completion time, but without affecting any of the original entity’s other attributes. (2) To avoid doubt, subsection (1) also covers everything that, immediately before the completion time, was taken, because of: (a) section 701 ‑ 1 (Single entity rule); or (b) section 701 ‑ 5 (Entry history rule); or (c) one or more previous applications of this section; or (d) section 719 ‑ 90 (about the effects of a change of head company of a MEC group); or (e) section 719 ‑ 125 (about the effects of a group conversion involving a MEC group); to have happened in relation to the original entity. (3) Subsections (1) and (2) have effect: (a) for the head company core purposes in relation to an income year ending after the completion time; and (b) for the entity core purposes in relation to an income year ending after the completion time; and (c) for the purposes of determining the respective balances of the * franking accounts of the original entity and the interposed company at and after the completion time. (4) Subsections (1) and (2) have effect subject to: (a) section 701 ‑ 40 (Exit history rule); and (b) a provision of this Act to which section 701 ‑ 40 is subject because of section 701 ‑ 85 (about exceptions to the core rules in Division 701). Note: An example of provisions covered by paragraph (b) of this subsection is Subdivision 717 ‑ E (about transferring to a company leaving a consolidated group various surpluses under the CFC rules in Part X of the Income Tax Assessment Act 1936 ).

Amendment history: Inserted by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 147 of 2005, effective Schedule 1 (items 4–168, 169(2), 170–176), Schedule 2 (items 1, 12–24, 26–28), Schedule 3, Schedule 4 (items 4–12), Schedule 5 (items 13, 14, 20), Schedule 6 (items 1, 2, 10(1)) and Schedule 7 (items 14–16, 20): Royal Assent | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 114 of 2010, effective Schedule 1 (items 40–86, 93(1), 95): Royal Assent | Amended by No 133 of 2014, effective s 4, Sch 1 (items 1, 4–29, 37–40) and Sch 2 (items 1–3, 5): 12 Dec 2014 (s 2(1) items 1, 2)

s 703-80 — Effects on the original entity’s tax position

In applying section 701 ‑ 30 to the original entity for the income year that includes the completion time, disregard a non ‑ membership period that starts before the completion time. Note 1: Section 701 ‑ 30 is about working out an entity’s tax position for a period when it is not a subsidiary member of any consolidated group. Its application can also affect the entity’s tax position in later income years. Note 2: Under section 703 ‑ 75 the interposed company inherits the original entity’s tax position for the part of the income year that ends before the completion time, with the consequence that the original entity’s taxable income, income tax payable, and losses of any sort, for that part are each nil. Because of section 703 ‑ 75 and this section, the only tax payable by the original entity for the income year arises because of the application of section 701 ‑ 30 to non ‑ membership periods in the income year after the completion time.

Amendment history: Inserted by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 133 of 2014, effective s 4, Sch 1 (items 1, 4–29, 37–40) and Sch 2 (items 1–3, 5): 12 Dec 2014 (s 2(1) items 1, 2)

s 705-1 — What this Division is about

When an entity becomes a subsidiary member of a consolidated group, the tax cost of its assets is set at a tax cost setting amount that is worked out in accordance with this Division. Table of Subdivisions 705 ‑ A Basic case: a single entity joining an existing consolidated group 705 ‑ B Case of group formation 705 ‑ C Case where a consolidated group is acquired by another 705 ‑ D Where multiple entities are linked by membership interests 705 ‑ E Adjustments for errors etc.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 705-5 — What this Subdivision is about

When an entity becomes a subsidiary member of an existing consolidated group, the tax cost setting amount for its assets reflects the cost to the group of acquiring the entity. Table of sections Application and object 705 ‑ 10 Application and object of this Subdivision 705 ‑ 15 Cases where this Subdivision does not have effect Tax cost setting amount for assets that joining entity brings into joined group 705 ‑ 20 Tax cost setting amount worked out under this Subdivision 705 ‑ 25 Tax cost setting amount for retained cost base assets 705 ‑ 27 Reduction in tax cost setting amount that exceeds market value of certain retained cost base assets 705 ‑ 30 What is the joining entity’s terminating value for an asset? 705 ‑ 35 Tax cost setting amount for reset cost base assets 705 ‑ 40 Tax cost setting amount for reset cost base assets held on revenue account etc. 705 ‑ 45 Reduction in tax cost setting amount for accelerated depreciation assets 705 ‑ 47 Reduction in tax cost setting amount for some privatised assets 705 ‑ 55 Order of application of sections 705 ‑ 40, 705 ‑ 45 and 705 ‑ 47 705 ‑ 56 Modification for tax cost setting in relation to leases 705 ‑ 57 Adjustment to tax cost setting amount where loss of pre ‑ CGT status of membership interests in joining entity 705 ‑ 58 Assets and liabilities not set off against each other 705 ‑ 59 Exception: treatment of linked assets and liabilities How to work out the allocable cost amount 705 ‑ 60 What is the joined group’s allocable cost amount for the joining entity? 705 ‑ 62 No double counting of amounts in allocable cost amount 705 ‑ 65 Cost of membership interests in the joining entity—step 1 in working out allocable cost amount 705 ‑ 70 Liabilities of the joining entity—step 2 in working out allocable cost amount 705 ‑ 75 Liabilities of the joining entity—reductions for purposes of step 2 in working out allocable cost amount 705 ‑ 76 Liability arising from transfer or assignment of securitised assets 705 ‑ 80 Liabilities of the joining entity—reductions/increases for purposes of step 2 in working out allocable cost amount 705 ‑ 85 Liabilities of the joining entity—increases for purposes of step 2 in working out allocable cost amount 705 ‑ 90 Undistributed, taxed profits accruing to joined group before joining time—step 3 in working out allocable cost amount 705 ‑ 93 If pre ‑ joining time roll ‑ over from foreign resident company or head company—step 3A in working out allocable cost amount 705 ‑ 95 Pre ‑ joining time distributions out of certain profits—step 4 in working out allocable cost amount 705 ‑ 100 Losses accruing to joined group before joining time—step 5 in working out allocable cost amount 705 ‑ 102 FRT disallowed amounts accruing to joined group before joining time—step 5A in working out allocable cost amount 705 ‑ 105 Continuity of holding membership interests—steps 3 to 5A in working out allocable cost amount 705 ‑ 110 If joining entity transfers a loss to the head company—step 6 in working out allocable cost amount 705 ‑ 112 If joining entity transfers a FRT disallowed amount to the head company—step 6A in working out allocable cost amount 705 ‑ 115 If head company becomes entitled to certain deductions—step 7 in working out allocable cost amount How to work out a pre ‑ CGT factor for assets of joining entity 705 ‑ 125 Pre ‑ CGT proportion for joining entity

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 705-10 — Application and object of this Subdivision

Application (1) This Subdivision has effect, subject to section 705 ‑ 15, for the head company core purposes set out in subsection 701 ‑ 1(2) if an entity (the joining entity ) becomes a * subsidiary member of a * consolidated group (the joined group ) at a particular time (the joining time ). Object (2) The object of this Subdivision is to recognise the * head company’s cost of becoming the holder of the joining entity’s assets as an amount reflecting the group’s cost of acquiring the entity. That amount consists of the cost of the group’s * membership interests in the joining entity, increased by the joining entity’s liabilities and adjusted to take account of the joining entity’s retained profits, distributions of profits, deductions and losses. (3) The reason for recognising the * head company’s cost in this way is to align the costs of assets with the costs of * membership interests, and to allow for the preservation of this alignment until the entity ceases to be a * subsidiary member, in order to: (a) prevent double taxation of gains and duplication of losses; and (b) remove the need to adjust costs of membership interests in response to transactions that shift value between them, as the required adjustments occur automatically. Note: Under Division 711, the alignment is preserved by recognising the head company’s cost of membership interests in the entity if it ceases to be a subsidiary member of the group as the cost of its assets reduced by its liabilities.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 705-15 — Cases where this Subdivision does not have effect

This Subdivision does not have effect if any of the following exceptions applies: (a) the first exception is where the joining entity becomes a * member of the joined group because it is a member of that group at the time it comes into existence as a * consolidated group; Note: See Subdivision 705 ‑ B for rules about the treatment of assets if entities become members in circumstances covered by this exception. (b) the second exception is where all of the members of another consolidated group become members of the joined group as a result of the * acquisition of * membership interests in the * head company of the joining group; Note: See Subdivision 705 ‑ C for rules about the treatment of assets if entities become members in circumstances covered by this exception. (c) the third exception is where: (i) the joining entity and one or more other entities become members of the joined group at the same time as a result of an event that happens in relation to one of them; and (ii) the case is not covered by the second exception; Note: See Subdivision 705 ‑ D for rules about the treatment of assets if entities become members in circumstances covered by this exception.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23)

s 705-20 — Tax cost setting amount worked out under this Subdivision

If this Subdivision has effect, for the purposes of item 1 in the table in section 701 ‑ 60 (Tax cost setting amount) the * tax cost setting amount for an asset whose * tax cost is set at the time the joining entity becomes a * subsidiary member of the joined group is worked out under this Subdivision.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2)

s 705-25 — Tax cost setting amount for retained cost base assets

(1) This section states what the * tax cost setting amount is for a * retained cost base asset. Australian currency (2) If the * retained cost base asset is covered by paragraph (a), (b) or (ba) of the definition of that expression and is not covered by another subsection of this section, its * tax cost setting amount is equal to the amount of the Australian currency concerned. Qualifying securities (3) If the * retained cost base asset is a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936 ), the * tax cost setting amount for the qualifying security is instead equal to the joining entity’s * terminating value for the asset. Entitlements to pre ‑ paid services etc. (4) If the * retained cost base asset is covered by paragraph (c) of the definition of that expression, its * tax cost setting amount is equal to the amount of the deductions to which the * head company is entitled under section 701 ‑ 5 (the entry history rule) in respect of the expenditure that gave rise to the entitlement. Note: If the total amount to be treated as tax cost setting amounts for retained cost base assets exceeds the joined group’s allocable cost amount for the joining entity, the head company makes a capital gain equal to the excess: see CGT event L3. Financial arrangements to which Subdivision 250 ‑ E applies (4A) The * tax cost setting amount is instead equal to the joining entity’s * terminating value for the * retained cost base asset if the asset is a * financial arrangement to which Subdivision 250 ‑ E applies immediately before the joining time. Rights to payments in respect of uncompleted work etc. (4B) If the * retained cost base asset is covered by paragraph (d) or (e) of the definition of that expression, its * tax cost setting amount is equal to the joining entity’s * terminating value for the asset. Retained cost base asset (5) A retained cost base asset is: (a) Australian currency, other than * trading stock or * collectables of the joining entity; or (b) a right to receive a specified amount of such Australian currency, other than a right that is a marketable security within the meaning of section 70B of the Income Tax Assessment Act 1936 ; or Example: A debt or a bank deposit. (ba) a unit in a * cash management trust, if: (i) the redemption value of the unit is expressed in Australian dollars; and (ii) the redemption value of the unit cannot increase; or (c) a right to have something done under an * arrangement under which: (i) expenditure has been incurred in return for the doing of the thing; and (ii) the thing is required or permitted to be done, or to cease being done, after the expenditure is incurred; or (d) a * right to future income (other than a * WIP amount asset); or (e) a * depreciating asset that the joining entity * holds as a result of a * balancing adjustment event mentioned in paragraph 417 ‑ 30(2)(b). Note 1: There are some additional retained cost base assets for a joining entity that is a life insurance company: see Subdivision 713 ‑ L. The tax cost setting amount for those assets is worked out under that Subdivision. Note 2: The joining entity’s right to receive lease payments under a lease is treated as a retained cost base asset in some circumstances (see paragraph 705 ‑ 56(3)(b)).

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 41 of 2011, effective Schedule 1 (items 1–3): 1 Jan 2011 Schedule 1 (items 4–6) and Schedule 5 (items 25–29, 33, 36–50, 74–78, 80–145, 148–167, 173–175, 383–396, 400, 414–418): Royal Assent Schedule 5 (items 9, 18–20): 28 June 2011 Schedule 5 (items 51–54): 1 July 2011 | Amended by No 99 of 2012, effective s 4 and Sch 3: 29 June 2012 (s 2(1) items 1, 7–10) Sch 1 (items 10, 11, 23): 30 June 2012 (s 2(1) item 3) Sch 2 (items 1–4, 6): 26 Mar 2009 (s 2(1) item 6) | Amended by No 59 of 2019, effective Sch 1 and Sch 2 (items 9–20): 30 Aug 2019 (s 2(1) item 2) | Amended by No 127 of 2021, effective Sch 1 and Sch 3 (items 42, 49–63, 65–69, 71, 72): 1 Jan 2022 (s 2(1) items 2, 5) Sch 2 (item 56) and Sch 3 (items 3–5, 33–35): 8 Dec 2021 (s 2(1) items 3, 4)

s 705-27 — Reduction in tax cost setting amount that exceeds market value of certain retained cost base assets

(1) If: (a) a * retained cost base asset of the joining entity is a right to receive a specified amount of such Australian currency, covered by paragraph 705 ‑ 25(5)(b); and (b) the * market value of the asset is less than the * tax cost setting amount of the asset; and (c) the head company makes a * capital gain under * CGT event L3 (disregarding this subsection) as a result of the joining entity becoming a * subsidiary member of the group; reduce the tax cost setting amount of the asset by the amount of the gain (but not below zero). Note: Reducing the tax cost setting amount of the asset will also reduce the amount of the capital gain (see paragraph 104 ‑ 510(1)(b)). The amount of the capital gain might be reduced to nil. (2) If: (a) the requirements in subsection 701 ‑ 58(1) (intra ‑ group assets) are satisfied in relation to the asset; and (b) the joining entity has been entitled to a deduction for an income year ending on or before the joining time because of the * market value of the asset being less than the specified amount mentioned in paragraph (1)(a); and (c) the accounting liability that corresponds to the asset has not been reduced under subsection 705 ‑ 75(2); reduce the amount of the reduction under subsection (1) by the amount of the deduction (but not below zero). (3) If the * tax cost setting amount of 2 or more of the joining entity’s assets could be reduced in accordance with subsections (1) and (2): (a) subsections (1) and (2) apply sequentially to each of those assets; and (b) the * head company may choose the sequence of assets to which subsections (1) and (2) apply; and (c) if the head company does not make such a choice—subsections (1) and (2) apply sequentially to each of those assets according to the time at which they were created, from earliest to latest. Note: Once the amount of the capital gain is reduced to nil as a result of the application of subsections (1) and (2), no further reductions of tax cost setting amount can be made under those subsections. (4) A choice the * head company can make under paragraph (3)(b) must be made: (a) by the day the head company lodges its * income tax return for the income year in which the * CGT event happened; or (b) within a further time allowed by the Commissioner. (5) The way the * head company prepares its * income tax return is sufficient evidence of the making of the choice.

Amendment history: Inserted by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-30 — What is the joining entity’s terminating value for an asset?

Trading stock (1) If an asset of the joining entity is * trading stock, the joining entity’s terminating value for the asset is: (a) if the asset was on hand at the start of the income year in which the joining time occurs (including because of the operation of Division 701)—its * value at that time; or (b) if paragraph (a) does not apply and the asset is * live stock that was acquired by natural increase—the * cost of the asset; or (c) in any other case—the amount of the outgoing incurred by the joining entity in connection with the acquisition of the asset; increased by the amount of any outgoing forming part of the cost of the asset that is incurred by the joining entity during its current holding of the asset. Registered emissions units (1A) If an asset of the joining entity is a * registered emissions unit, the joining entity’s terminating value for the unit is equal to: (a) if the unit was * held by the joining entity at the start of the income year—the * value of the unit at the start of the income year; or (b) otherwise—the expenditure incurred by the joining entity in becoming the holder of the unit. Qualifying securities (2) If an asset of the joining entity is a qualifying security (within the meaning of Division 16E of Part III of the Income Tax Assessment Act 1936 ) that is not * trading stock, the joining entity’s terminating value for the asset is equal to the amount of consideration that the joining entity would need to receive, if it were to dispose of the asset just before the joining time, without an amount being assessable income of, or deductible to, the joining entity under section 159GS of the Income Tax Assessment Act 1936 . Depreciating assets (3) If an asset of the joining entity is a * depreciating asset to which Division 40 applies, the joining entity’s terminating value for the asset is equal to the asset’s * adjustable value just before the joining time. Financial arrangements to which Subdivision 250 ‑ E applies (3A) If an asset of the joining entity is a * financial arrangement to which Subdivision 250 ‑ E applies, the joining entity’s terminating value for the asset is equal to the amount of consideration that the joining entity would need to receive, if it were to dispose of the asset just before the joining time, without an amount being assessable income of, or deductible to, the joining entity under Subdivision 250 ‑ E. Division 230 financial arrangements (3B) If an asset of the joining entity is or is part of a * Division 230 financial arrangement, the joining entity’s terminating value for the asset is equal to the amount of consideration that the joining entity would need to receive, if it were to dispose of the asset just before the joining time, without an amount being assessable income of, or deductible to, the joining entity under Division 230. Other CGT assets (4) If an asset of the joining entity is a * CGT asset that is not covered by any of the above subsections, the joining entity’s terminating value for the asset is equal to the asset’s * cost base just before the joining time. Other assets (5) The joining entity’s terminating value for any other asset that it holds is the amount that would be the asset’s * cost base just before the joining time if it were an asset covered by subsection (4).

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 164 of 2007, effective s. 4, Schedule 1 (items 1–24, 36–67, 71), Schedules 2–6, Schedule 7 (items 1–3, 5–12, 14), Schedule 8 (items 6–13), Schedule 9 and Schedule 10 (items 1, 7–25, 91, 92): Royal Assent Schedule 10 (items 57–88): 1 July 2010 Sch 12 (items 72–87): 27 Sept 2007 (s 2(1) item 9) | Amended by No 15 of 2009, effective Sch 1 (items 1–30, 52–97, 102–105): 26 Mar 2009 (s 2(1) item 2) Sch 1 (items 106–112, 114): 17 Dec 2003 (s 2(1) item 3) | Amended by No 132 of 2011, effective Sch 2 (items 4–71): 2 Apr 2012 (s 2(1) item 5) Sch 2 (items 74–77): never commenced (s 2(1) item 6 (rep by 83, 2014, Sch 3 item 1)) | Amended by No 15 of 2017, effective Sch 1 (item 1): 1 Mar 2017 (s 2(1) item 2) Sch 2 and Sch 4 (items 26–69, 71–83): 1 Apr 2017 (s 2(1) items 3, 8, 10) Sch 4 (item 70): 19 Mar 2015 (s 2(1) item 9)

s 705-35 — Tax cost setting amount for reset cost base assets

(1) For each asset of the joining entity (a reset cost base asset ) that is not a * retained cost base asset, the asset’s * tax cost setting amount is worked out by: (a) first working out the joined group’s * allocable cost amount for the joining entity in accordance with section 705 ‑ 60; and (b) then reducing that amount by the total of the * tax cost setting amounts for each retained cost base asset (but not below zero); and (c) finally, allocating the result to each of the joining entity’s reset cost base assets in proportion to their * market values. Note 1: For an asset consisting of an entitlement to receive an amount that will be included in assessable income, the market value of the asset would take into account the tax payable on the amount. Note 1A: If a set of linked assets and liabilities includes one or more reset cost base assets, section 705 ‑ 59 may affect how this section applies. In particular, that section may exclude the application of paragraph 705 ‑ 35(1)(b) to retained cost base assets in the set; this in turn may affect the application of CGT event L3. Note 2: If there are no reset cost base assets, the result is instead treated as a capital loss of the head company: see CGT event L4. Goodwill resulting from ownership and control of the joining entity (3) If, just after the joining time, the * head company has, because of its ownership and control of the joining entity, a goodwill asset associated with assets or businesses of the joined group: (a) for the head company core purposes, the asset’s * tax cost is set at the joining time at its * tax cost setting amount; and (b) for the purpose of doing so: (i) the asset is taken to be an asset of the joining entity that becomes an asset of the head company because subsection 701 ‑ 1(1) (the single entity rule) applies; and (ii) it is taken to have a * market value just before the joining time of an amount equal to its market value just after the joining time.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 67 of 2003, effective Schedule 10 (items 13–16): 14 Oct 2003 ( see s. 2(1)) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 99 of 2012, effective s 4 and Sch 3: 29 June 2012 (s 2(1) items 1, 7–10) Sch 1 (items 10, 11, 23): 30 June 2012 (s 2(1) item 3) Sch 2 (items 1–4, 6): 26 Mar 2009 (s 2(1) item 6)

s 705-40 — Tax cost setting amount for reset cost base assets held on revenue account etc.

(1) The * tax cost setting amount for a reset cost base asset that is * trading stock, a * depreciating asset, a * registered emissions unit or a * revenue asset must not exceed the greater of: (a) the asset’s * market value; and (b) the joining entity’s * terminating value for the asset. (2) If subsection (1) reduces the asset’s * tax cost setting amount, the amount of the reduction is allocated among the other reset cost base assets (including other * trading stock, * depreciating assets, * registered emissions units and * revenue assets), so as to increase their tax cost setting amounts, in accordance with the principles set out in subsection (3). Note: If any of the amount of the reduction cannot be allocated, it is instead treated as a capital loss of the head company: see CGT event L8. (3) These are the principles: (a) the allocation is to be in proportion to the * market values of the assets; (b) the amount allocated to an item of * trading stock, to a * depreciating asset, to a * registered emissions unit or to a * revenue asset must not cause its * tax cost setting amount to contravene subsection (1); (c) any of the amount that cannot be allocated is to be reallocated, to the maximum extent possible, among the remaining reset cost base assets by applying this subsection a further one or more times.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Repealed and substituted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 107 of 2003, effective Sch 6: 1 July 2003 (s 2(1) item 3) Sch 7 (items 6–8): 30 June 2003 (s 2(1) item 5) Sch 7 (item 15): 17 Dec 2003 (s 2(1) item 7) Remainder: 21 Oct 2003 (s 2(1) items 1, 2, 4, 6, 8) | Amended by No 132 of 2011, effective Sch 2 (items 4–71): 2 Apr 2012 (s 2(1) item 5) Sch 2 (items 74–77): never commenced (s 2(1) item 6 (rep by 83, 2014, Sch 3 item 1)) | Amended by No 99 of 2012, effective s 4 and Sch 3: 29 June 2012 (s 2(1) items 1, 7–10) Sch 1 (items 10, 11, 23): 30 June 2012 (s 2(1) item 3) Sch 2 (items 1–4, 6): 26 Mar 2009 (s 2(1) item 6)

s 705-45 — Reduction in tax cost setting amount for accelerated depreciation assets

(1) If: (a) an asset of the joining entity is a * depreciating asset to which Division 40 applies; and (aa) just before the entity became a subsidiary member, subsection 40 ‑ 10(3) or 40 ‑ 12(3) of the Income Tax (Transitional Provisions) Act 1997 applied for the purposes of the joining entity working out the asset’s decline in value under Division 40; and Note: The effect of those subsections was to preserve an entitlement to accelerated depreciation. (b) the asset’s * tax cost setting amount would be greater than the joining entity’s * terminating value for the asset; and (c) the * head company chooses to apply this section to the asset; the asset’s tax cost setting amount is reduced so that it equals the terminating value. Note 1: A consequence of the choice is that accelerated depreciation will apply to the asset: see section 701 ‑ 80. Note 2: Unlike the position with a reduction in tax cost setting amount under section 705 ‑ 40, the amount of the reduction is not re ‑ allocated among other assets. (2) If: (a) an asset of the joining entity is a * depreciating asset to which Division 40 applies; and (b) any of the following has applied before the joining entity became a * subsidiary member for the purposes of working out the asset’s decline in value under Division 40: (i) section 40 ‑ 82; (ii) Subdivision 40 ‑ BA of the Income Tax (Transitional Provisions) Act 1997 ; (iii) Subdivision 40 ‑ BB of that Act; and (c) the asset’s * tax cost setting amount would be greater than the joining entity’s * terminating value for the asset; the asset’s tax cost setting amount is reduced so that it equals the terminating value. Note 1: The provisions referred to in paragraph (b) provide for an accelerated decline in value of certain assets. Note 2: Unlike the position with a reduction in tax cost setting amount under section 705 ‑ 40, the amount of the reduction is not re ‑ allocated among other assets.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 107 of 2003, effective Sch 6: 1 July 2003 (s 2(1) item 3) Sch 7 (items 6–8): 30 June 2003 (s 2(1) item 5) Sch 7 (item 15): 17 Dec 2003 (s 2(1) item 7) Remainder: 21 Oct 2003 (s 2(1) items 1, 2, 4, 6, 8) | Amended by No 22 of 2020, effective Sch 1 (items 1–14), Sch 2 (items 1–6) and Sch 4 (items 12–22): 25 Mar 2020 (s 2(1) items 2, 4) Sch 3 (items 1, 2): 24 Mar 2020 (s 2(1) item 3) | Amended by No 92 of 2020, effective Sch 1 (items 18–21, 24): 15 Oct 2020 (s 2(1) item 4) Sch 1 (items 25–27): 1 July 2022 (s 2(1) item 5) Sch 2 (items 1–3, 16–35), Sch 3 (items 25–36, 40), Sch 4 (items 1–11, 14), Sch 5 (items 11–38, 56) and Sch 7 (items 5–8, 12–25): 1 Jan 2021 (s 2(1) item 7)

s 705-47 — Reduction in tax cost setting amount for some privatised assets

Object (1) The object of this section is to limit appropriately the amount the * head company of the joined group can deduct for a * depreciating asset it starts to * hold because the joining entity becomes a * subsidiary member of the group, by reference to the direct or indirect effect of the following provisions on the amount the joining entity could deduct for the asset: (a) former section 61A of the Income Tax Assessment Act 1936 (about depreciation deductions for tax ‑ exempt entities that become taxable); (b) former Subdivision 57 ‑ I, and Subdivision 57 ‑ J, in Schedule 2D to the Income Tax Assessment Act 1936 (about depreciation and capital allowance deductions); (c) Division 58 of this Act (as that Division applies to a transition time or acquisition time mentioned in that Division before, on or after 1 July 2001). Reduction of tax cost setting amount (2) The * tax cost setting amount for a * depreciating asset is reduced to the joining entity’s * terminating value for the asset if: (a) at a time before the joining entity became a * subsidiary member of the joined group, the asset was * held by an entity (whether the joining entity or another entity) that, at that time, was: (i) an * exempt Australian government agency; or (ii) another entity whose * ordinary income and * statutory income were exempt from income tax; and (b) any of the following provisions directly or indirectly affected the amount the joining entity could deduct for the asset: (i) former section 61A of the Income Tax Assessment Act 1936 (about depreciation deductions for tax ‑ exempt entities that become taxable); (ii) former Subdivision 57 ‑ I, and Subdivision 57 ‑ J, in Schedule 2D to the Income Tax Assessment Act 1936 (about depreciation and * capital allowance deductions); (iii) Division 58 of this Act (as that Division applies to a transition time or acquisition time mentioned in that Division before, on or after 1 July 2001); and (c) apart from this section, the tax cost setting amount for the asset would exceed the joining entity’s terminating value for the asset. Note 1: Unlike the position with a reduction in tax cost setting amount under section 705 ‑ 40, the amount of the reduction is not re ‑ allocated among other assets. Note 2: Former section 61A of, or former Subdivision 57 ‑ I or Subdivision 57 ‑ J in Schedule 2D to, the Income Tax Assessment Act 1936 or Division 58 of this Act may, for example, have indirectly affected the amount the joining entity could deduct for the asset because: (a) that section, Subdivision or Division affected the amount that could be deducted by an entity that held the asset before the joining entity and that effect extended to the joining entity because of a previous application of this subsection, roll ‑ over relief or section 701 ‑ 40 (the exit history rule); or (b) this subsection affected the amount the joining entity could deduct for the asset (either directly or because of section 701 ‑ 40). Note 3: Subsection (2) has effect even if, just before the joining time, the joining entity was: (a) an exempt Australian government agency; or (b) another entity whose ordinary income and statutory income were exempt from income tax. This is because section 715 ‑ 900 causes Division 58 to apply as if, just before the joining time, the joining entity’s ordinary income or statutory income had become assessable income to some extent. Exception to reduction of tax cost setting amount (3) Subsection (2) does not apply if: (a) just before the joining time, the joining entity was neither an * exempt Australian government agency nor another entity whose * ordinary income and * statutory income were exempt from income tax; and (b) a condition in subsection (4) or (5) is met in relation to the period (the pre ‑ joining taxable period ) between the last time for which the condition in paragraph (2)(a) is met and the joining time. (4) One condition for subsection (2) not to apply is that an amount was included in an entity’s assessable income, or an entity could deduct an amount, because of a * balancing adjustment event that occurred for the asset during the pre ‑ joining taxable period. (5) Another condition for subsection (2) not to apply is that: (a) for at least some of the pre ‑ joining taxable period, the asset was * held by the * head company of a * consolidated group (the earlier group ) for the period (the earlier group period ): (i) starting when (and because) an entity that had previously held the asset became a * subsidiary member of the earlier group or when the asset started to be held by that company because of an asset sale situation described in subsection 58 ‑ 5(4) involving a * member of the earlier group as the purchaser mentioned in that subsection; and (ii) ending when (and because) an entity ceased to be a subsidiary member of the earlier group or when the earlier group ceased to exist; and (b) the company that was the head company of the earlier group just before the end of the earlier group period was not : (i) an * associate of the head company of the joined group just before the joining time; or (ii) the same company as the head company of the joined group; and (c) the earlier group period was at least 24 months.

Amendment history: Inserted by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent

s 705-55 — Order of application of sections 705 ‑ 40, 705 ‑ 45 and 705 ‑ 47

If more than one of sections 705 ‑ 40, 705 ‑ 45 and 705 ‑ 47 apply: (a) the * head company may choose the order in which the sections are to apply; and (b) if it does not, the order is as follows: (i) first, section 705 ‑ 40; (ii) second, section 705 ‑ 45; (iii) third, section 705 ‑ 47.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 64 of 2020, effective Sch 3 (items 72–122): 1 July 2020 (s 2(1) item 5) Sch 3 (items 228–239, 325, 326): 1 Oct 2020 (s 2(1) item 6) Sch 3 (items 327–330): 1 July 2017 (s 2(1) item 7)

s 705-56 — Modification for tax cost setting in relation to leases

Application of this section (1) This section applies if, just before the joining time, the joining entity is the lessor or lessee under a lease of a * depreciating asset (the underlying asset ) to which Division 40 applies. Joining entity is lessor (2) If the joining entity is the lessor under the lease and * holds the underlying asset just before the joining time, subsection (5) applies, in relation to the joining entity, to the asset that is the joining entity’s right to receive lease payments. Note: In this situation, the underlying asset will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701 ‑ 10). (3) If the joining entity is the lessor under the lease and does not * hold the underlying asset just before the joining time: (a) subsection (5) applies to the underlying asset in relation to the joining entity; and (b) for the purposes of this Division: (i) the joining entity’s right to receive lease payments is taken to be a * retained cost base asset; and (ii) the * tax cost setting amount of that retained cost base asset is taken to be equal to its * market value just before the joining time. Note: In this situation, the asset that is the joining entity’s right to receive lease payments will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701 ‑ 10). Joining entity is lessee (4) If the joining entity is the lessee under the lease and does not * hold the underlying asset just before the joining time: (a) subsection (5) applies to the underlying asset in relation to the joining entity; and (b) the liability that is the lessee’s obligation to make lease payments is not taken into account under subsection 705 ‑ 70(1). Note: If the joining entity is the lessee under the lease and holds the underlying asset just before the joining time: (a) the underlying asset will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701 ‑ 10); and (b) the liability that is the lessee’s obligation to make lease payments is taken into account under subsection 705 ‑ 70(1). Tax cost of certain assets set at nil (5) If this subsection applies to an asset, in relation to the joining entity: (a) the asset is not taken into account under paragraph 705 ‑ 35(1)(b) or (c); and (b) the asset’s * tax cost setting amount is taken to be nil.

Amendment history: Inserted by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 127 of 2021, effective Sch 1 and Sch 3 (items 42, 49–63, 65–69, 71, 72): 1 Jan 2022 (s 2(1) items 2, 5) Sch 2 (item 56) and Sch 3 (items 3–5, 33–35): 8 Dec 2021 (s 2(1) items 3, 4)

s 705-57 — Adjustment to tax cost setting amount where loss of pre ‑ CGT status of membership interests in joining entity

Object (1) The object of this section is to ensure that provisions that cause * membership interests in the joining entity to stop being * pre ‑ CGT assets, with a resultant increase in their * cost base and * reduced cost base, do not increase * tax cost setting amounts for * trading stock, * depreciating assets, * registered emissions units or * revenue assets of the joining entity, where those amounts are above the joining entity’s * terminating values for the assets. When section applies (2) This section applies if: (a) a * membership interest that a * member of the joined group holds in the joining entity at the joining time had previously stopped being a * pre ‑ CGT asset in the circumstances covered by any of subsections (3) to (5); and (b) the * cost base or * reduced cost base of the membership interest just after it stopped being a pre ‑ CGT asset exceeded (the excess being the loss of pre ‑ CGT status adjustment amount ) its cost base or reduced cost base just before it stopped being a pre ‑ CGT asset; and (c) an asset (a revenue etc. asset ) that is * trading stock, a * depreciating asset, a * registered emissions unit or a * revenue asset becomes that of the * head company of the joined group because subsection 701 ‑ 1(1) (the single entity rule) applies when the joining entity becomes a * subsidiary member of the group; and (d) the revenue etc. asset’s * tax cost setting amount (after any application of section 705 ‑ 40, 705 ‑ 45 or 705 ‑ 47) exceeds the joining entity’s * terminating value for the asset. Loss of pre ‑ CGT status because Division 149 etc. applied while interest held by member (3) The first circumstance for the purpose of paragraph (2)(a) is where Division 149 of this Act, former subsection 160ZZS(1) of the Income Tax Assessment Act 1936 or Subdivision C of Division 20 of former Part IIIA of that Act applied to cause the * membership interest to stop being a * pre ‑ CGT asset while the * member held the membership interest. Loss of pre ‑ CGT status because Division 149 etc. applied before current holding by member (4) The second circumstance for the purpose of paragraph (2)(a) is where: (a) either: (i) the * member * acquired the * membership interest directly from another entity; or (ii) the member acquired the membership interest indirectly from another entity or from itself as a result of 2 or more acquisitions; and (b) Division 149 of this Act, former subsection 160ZZS(1) of the Income Tax Assessment Act 1936 or Subdivision C of Division 20 of former Part IIIA of that Act applied to cause the membership interest to stop being a * pre ‑ CGT asset while the other entity held the membership interest or while the member held the membership interest on the previous occasion; and (c) if subparagraph (a)(i) applies—at the time of the acquisition, the member * controlled (for value shifting purposes) the other entity, or vice versa, or a third entity controlled (for value shifting purposes) the member and the other entity; and (d) if subparagraph (a)(ii) applies—the same entity: (i) was a party to each acquisition and at the time of the acquisition controlled (for value shifting purposes) the other party; or (ii) was a party to each acquisition and at the time of the acquisition was controlled (for value shifting purposes) by the other party; or (iii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; or any combination of subparagraphs (i) to (iii) occurred in relation to different acquisitions. Loss of pre ‑ CGT status because of acquisition from another entity (5) The third circumstance for the purpose of paragraph (2)(a) is where: (a) either: (i) the * member acquired the * membership interest after 16 May 2002 directly from another entity; or (ii) the member acquired the membership interest indirectly from another entity or from itself as a result of 2 or more acquisitions, all of which took place after 16 May 2002; and (b) the membership interest stopped being a * pre ‑ CGT asset because of the acquisition from the other entity or from the member while the member held the membership interest on a previous occasion; and (c) if subparagraph (a)(i) applies—at the time of the acquisition, the member * controlled (for value shifting purposes) the other entity, or vice versa, or a third entity controlled (for value shifting purposes) the member and the other entity; and (d) if subparagraph (a)(ii) applies—the same entity: (i) was a party to each acquisition and at the time of the acquisition controlled (for value shifting purposes) the other parties; or (ii) was a party to each acquisition and at the time of the acquisition was controlled (for value shifting purposes) by the other party; or (iii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; or any combination of subparagraphs (i) to (iii) occurred in relation to different acquisitions. Reduction in revenue etc. asset’s tax cost setting amount (6) The revenue etc. asset’s * tax cost setting amount (after any application of section 705 ‑ 40, 705 ‑ 45 or 705 ‑ 47) is instead the amount that would apply if, in working out the step 1 amount in the table in section 705 ‑ 60, the * cost base and * reduced cost base of the * membership interest were reduced by the sum of the loss of pre ‑ CGT status adjustment amounts for the membership interest and all other membership interests that have loss of pre ‑ CGT status adjustment amounts. Limit on reduction (7) However, the reduction only takes place to the extent that it does not result in the asset’s * tax cost setting amount being less than the joining entity’s * terminating value for the asset. Note: The reduction under this section is converted into a capital loss available over a period of 5 income years starting with the income year in which the joining time occurs: see CGT event L1.

Amendment history: Inserted by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 132 of 2011, effective Sch 2 (items 4–71): 2 Apr 2012 (s 2(1) item 5) Sch 2 (items 74–77): never commenced (s 2(1) item 6 (rep by 83, 2014, Sch 3 item 1))

s 705-58 — Assets and liabilities not set off against each other

(1) This Part applies separately to each asset and liability even if, in accordance with * accounting principles, they are required to be set off against each other. (2) This section has effect subject to section 705 ‑ 59.

Amendment history: Inserted by No 67 of 2003, effective Schedule 10 (items 13–16): 14 Oct 2003 ( see s. 2(1)) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-59 — Exception: treatment of linked assets and liabilities

(1) This section applies to each set of * linked assets and liabilities that the joining entity has immediately before the joining time. (2) One or more assets, and one or more liabilities, that an entity has constitute a set of linked assets and liabilities of the entity if, and only if, in accordance with the entity’s * accounting principles for tax cost setting: (a) the total of the one or more assets is to be set off against the total of the one or more liabilities in preparing statements of the entity’s financial position; and (b) the net amount after the set ‑ off is to be recognised in those statements. (3) If the set consists only of one reset cost base asset for the purposes of section 705 ‑ 35, and one or more liabilities: (a) first, work out the total (the available amount ) that, apart from this section and the accounting requirement referred to in subsection (2) of this section, would be taken into account under subsection 705 ‑ 70(1) (about step 2 in working out the allocable cost amount) for the one or more liabilities; and (b) next, work out the consequences under this table. Treatment of linked assets and liabilities: single reset cost base asset case Item If the asset’s * market value at the joining time: This is the result for the asset: This is the result for the one or more liabilities: 1 is less than or equal to the available amount its * tax cost setting amount is that market value (and the asset is not taken into account under paragraph 705 ‑ 35(1)(c)) only the difference (if any) is taken into account under subsection 705 ‑ 70(1) for the one or more liabilities 2 is greater than the available amount its * tax cost setting amount is: (a) the available amount; plus (b) the amount worked out for the asset under section 705 ‑ 35 on the basis that the asset’s * market value is reduced by the available amount the one or more liabilities are not taken into account under subsection 705 ‑ 70(1) Note: Paragraph 705 ‑ 35(1)(c) allocates the allocable cost amount (as reduced by the tax cost setting amounts of retained cost base assets) among the joining entity’s reset cost base assets. (4) If the set consists only of one or more * retained cost base assets and one or more liabilities, this section does not affect their treatment. Note: This is because the tax cost setting amount for a retained cost base asset is worked out without regard to the allocable cost amount. (5) In any other case: (a) first, work out the available amount under paragraph (3)(a); and (b) next, work out the consequences under this table. Treatment of linked assets and liabilities: all other cases Item In this case: This is the result for the one or more assets in the set: This is the result for the one or more liabilities in the set: 1 there is no * retained cost base asset in the set, and the total of the respective * market values (at the joining time) of the assets in the set is less than or equal to the available amount the * tax cost setting amount of each of the assets is that asset’s market value at the joining time (and none of them is taken into account under paragraph 705 ‑ 35(1)(c)) only the difference (if any) is taken into account under subsection 705 ‑ 70(1) 2 there is no * retained cost base asset in the set, and the total of the respective * market values (at the joining time) of the assets in the set is greater than the available amount the * tax cost setting amount of each of the assets is the sum of: (a) a share of the available amount that is proportionate to that asset’s market value at the joining time; and (b) the amount worked out for the asset under section 705 ‑ 35 on the basis that the asset’s market value at the joining time is reduced by the share referred to in paragraph (a) none is taken into account under subsection 705 ‑ 70(1) 3 there are one or more * retained cost base assets in the set, and the total of their respective * tax cost setting amounts is greater than or equal to the available amount this section does not affect the treatment of the one or more assets in the set this section does not affect the treatment of the one or more liabilities in the set 4 there are one or more * retained cost base assets in the set, and the total (the retained cost base total ) of their respective * tax cost setting amounts is less than the available amount the one or more retained cost base assets are not taken into account under paragraph 705 ‑ 35(1)(b); the * tax cost setting amount of each remaining asset in the set is worked out by applying item 1 or 2, as appropriate, of this table on the basis that: (a) the available amount is reduced by the retained cost base total; and (b) the one or more retained cost base assets are otherwise ignored the available amount is reduced by the retained cost base total Note 1: Paragraph 705 ‑ 35(1)(b) reduces the allocable cost amount by the tax cost setting amounts of retained cost base assets. Item 4 of the table in this subsection excludes the application of paragraph 705 ‑ 35(1)(b) to retained cost base assets in the set; this in turn may affect the application of CGT event L3. Note 2: Paragraph 705 ‑ 35(1)(c) then allocates the reduced allocable cost amount among the joining entity’s reset cost base assets. (6) In applying subsections (3), (4) and (5) of this section, disregard an asset covered by subsection 705 ‑ 35(2) (assets that do not have a tax cost setting amount). (7) This section does not affect the application of sections 705 ‑ 40, 705 ‑ 45 and 705 ‑ 47 (which adjust the tax cost setting amount for a reset cost base asset).

Amendment history: Inserted by No 67 of 2003, effective Schedule 10 (items 13–16): 14 Oct 2003 ( see s. 2(1)) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-60 — What is the joined group’s allocable cost amount for the joining entity?

Work out the joined group’s allocable cost amount for the joining entity in this way: Working out the joined group’s allocable cost amount for the joining entity Step What the step requires Purpose of the step 1 Start with the step 1 amount worked out under section 705 ‑ 65, which is about the cost of * membership interests in the joining entity held by * members of the joined group To ensure that the allocable cost amount includes the cost of * acquiring the membership interests 2 Add to the result of step 1 the step 2 amount worked out under section 705 ‑ 70, which is about the value of the joining entity’s liabilities To ensure that the joining entity’s liabilities at the joining time, which are part of the joined group’s cost of acquiring the joining entity, are reflected in the allocable cost amount 3 Add to the result of step 2 the step 3 amount worked out under: (a) section 705 ‑ 90, which is about undistributed, taxed profits accruing to the joined group before the joining time; or (b) if the joining entity is a trust (and not a * corporate tax entity)—section 713 ‑ 25, which is about undistributed, realised profits accruing to the joined group before the joining time that could be distributed tax free To increase the allocable cost amount: (a) to reflect the undistributed, taxed profits and so prevent double taxation; or (b) if the joining entity is a trust—to reflect the undistributed, realised profits that could be distributed tax free 3A For each step 3A amount (if any) under section 705 ‑ 93 (which is about pre ‑ joining time roll ‑ overs): (a) if the step 3A amount is a * deferred roll ‑ over loss—add to the result of step 3 (as affected by any previous application of this step) the step 3A amount; or (b) if the step 3A amount is a * deferred roll ‑ over gain—subtract from the result of step 3 (as affected by any previous application of this step) the step 3A amount To adjust for certain roll ‑ overs before the joining time affecting deferred gains and losses 4 Subtract from the result of step 3A the step 4 amount worked out under section 705 ‑ 95, which is about pre ‑ joining time distributions out of certain profits To prevent the allocable cost amount reflecting return of part of the amount paid to * acquire the * membership interests in the joining entity 5 Subtract from the result of step 4 the step 5 amount worked out under section 705 ‑ 100, which is about certain losses accruing to the joined group before the joining time To prevent: (a) a double benefit arising from the losses; and (b) losses that cannot be transferred to the * head company, or are cancelled by the head company, under Subdivision 707 ‑ A being reinstated in an unrealised form or reducing unrealised gains. 5A Subtract from the result of step 5 the step 5A amount worked out under section 705 ‑ 102, which is about certain * FRT disallowed amounts accruing to the joined group before the joining time To prevent a double benefit arising from the FRT disallowed amounts 6 Subtract from the result of step 5A the step 6 amount worked out under section 705 ‑ 110, which is about losses that the joining entity transferred to the * head company under Subdivision 707 ‑ A To stop the joined group getting benefits both through higher * tax cost setting amounts for the joining entity’s assets and through losses transferred to the head company 6A Subtract from the result of step 6 the step 6A amount worked out under section 705 ‑ 112, which is about * FRT disallowed amounts that the joining entity transferred to the * head company under section 820 ‑ 590 To stop the joined group getting benefits both through higher * tax cost setting amounts for the joining entity’s assets and through FRT disallowed amounts transferred to the head company 7 Subtract from the result of step 6A the step 7 amount worked out under section 705 ‑ 115, which is about certain deductions to which the * head company is entitled To stop the joined group getting benefits both through the * tax cost of the joining entity’s assets being set and through certain tax deductions of the joining entity being inherited by the head company 8 If the remaining amount is positive, it is the joined group’s allocable cost amount. Otherwise the joined group’s allocable cost amount is nil. Note: The head company may be taken to have made a capital gain, depending on the amount remaining after applying step 3A: see CGT event L2.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-62 — No double counting of amounts in allocable cost amount

(1) The object of this section is to prevent a particular amount from being taken into account more than once in calculating the * allocable cost amount for the joining entity, in order to promote the object of this Subdivision set out in section 705 ‑ 10. (2) Subsection (3) applies if, apart from this section, 2 or more provisions of this Act operate with the result of altering: (a) the * allocable cost amount for the joining entity; or (b) the allocable cost amount for another entity that becomes a * subsidiary member of the group at the joining time; because of a particular economic attribute of the joining entity (see subsection (6)). (3) Only one of those alterations is to be made, as follows: (a) if the * head company of the group makes a choice in accordance with subsections (4) and (5)—the alteration specified in the choice is to be made; (b) otherwise—the alteration that is most appropriate (in the light of the object of this Subdivision) is to be made. (4) A choice mentioned in paragraph (3)(a) must be made: (a) by the day the * head company of the group lodges its * income tax return for the income year in which the joining time occurs; or (b) within a further time allowed by the Commissioner. (5) A choice mentioned in paragraph (3)(a) must be made in writing. (6) The economic attributes of the joining entity mentioned in subsection (2) include the following: (a) the joining entity’s retained profits; (b) the joining entity’s distributions of profits to other entities; (c) the joining entity’s realised and unrealised losses; (d) the joining entity’s deductions; (e) the joining entity’s accounting liabilities (within the meaning of subsection 705 ‑ 70(1)); (f) consideration received by the joining entity for issuing * membership interests in itself.

Amendment history: Inserted by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-65 — Cost of membership interests in the joining entity—step 1 in working out allocable cost amount

(1) For the purposes of step 1 in the table in section 705 ‑ 60, the step 1 amount is the sum of the following amounts for each * membership interest that * members of the joined group hold in the joining entity at the joining time: Note: If the joining entity is a trust, the step 1 amount may be increased by section 713 ‑ 20 for settled capital that could be distributed tax free in respect of discretionary interests in the trust. Working out the step 1 amount Item If the market value of the membership interest is... The amount is... 1 equal to or greater than its * cost base its cost base 2 less than its * cost base but greater than its * reduced cost base its * market value 3 less than or equal to its * reduced cost base its reduced cost base Note: Under section 716 ‑ 855, if membership interests are pre ‑ CGT assets that have been subject to certain roll ‑ overs, the cost base and reduced cost base are worked out in the same way as if they were post ‑ CGT assets. No indexation of cost base of pre ‑ CGT membership interests (2) If the * membership interest is a * pre ‑ CGT asset, in working out its * cost base for the purposes of subsection (1) no element is indexed. Adjustment if value shifting or loss transfer provision could apply (3) If, on the assumption that a * CGT event had happened just before the joining time in relation to the * membership interest, the * cost base or the * reduced cost base of the membership interest would have been changed by a provision of this Act, then the cost base or reduced cost base of the membership interest that is to be used in subsection (1) of this section is instead: (a) the cost base as it would have been so changed; or (b) the reduced cost base, as it would have been so changed, but ignoring the amount of any reduction resulting from the application of former subsection 160ZK(5) of the Income Tax Assessment Act 1936 . Note: For example, a change in the cost base or reduced cost base may be required under provisions that apply where a loss transfer or value shift involving the joining entity has occurred. (3AA) If, on the assumption that: (a) the * members of the joined group had, just before the joining time, * disposed of their * membership interest in the joining entity; and (b) the consideration received by the members for the disposal were equal to the * market value of the membership interest at that time; they would have made a * capital loss that section 727 ‑ 615 would have reduced (because of an indirect value shift), then the * reduced cost base of the membership interest that is to be used in subsection (1) of this section is reduced by the amount of that reduction. Reduction if section 165 ‑ 115ZD could apply (3A) If, on the assumption that: (a) the * members of the joined group had, just before the joining time, * disposed of their * membership interest in the joining entity; and (b) the consideration received by the members for the disposal were equal to the * market value of the membership interest at that time; the * reduced cost base of the membership interest would have been reduced as a result of the operation of section 165 ‑ 115ZD of this Act or the Income Tax (Transitional Provisions) Act 1997 , then the reduced cost base of the membership interest that is to be used in subsection (1) of this section is reduced by the amount of that reduction. Certain provisions not to apply after joining time (4) Also, if a provision mentioned in subsection (3), (3AA) or (3A) would, because of events that happened before the joining time, apply to a * CGT event or a * realisation event that happens after the joining time in relation to the * members’ * membership interests in the joining entity, the provision does not so apply. Reduction in cost base under subsection 110 ‑ 55(7) to be added back (5) If, in working out the * reduced cost base of the * membership interest for the purposes of subsection (1), a reduction has taken place under subsection 110 ‑ 55(7) (about certain distributions of pre ‑ acquisition profits), the reduced cost base is increased by the amount of that reduction. Reduction in reduced cost base under subsection 165 ‑ 115ZA(3) to be added back (5A) If: (a) in working out the * reduced cost base of the * membership interest for the purposes of subsection (1), a reduction has taken place under subsection 165 ‑ 115ZA(3) (about alterations in ownership or control of loss companies); and (b) the reduction is to some extent attributable to so much of an amount that was taken into account both in working out the amount of the reduction and in working out: (i) the step 5 amount under section 705 ‑ 100; or (ia) the step 5A amount under section 705 ‑ 102; or (ii) the step 6 amount under section 705 ‑ 110; or (iii) the step 6A amount under section 705 ‑ 112; the reduced cost base is, to the extent mentioned in paragraph (b), increased by: (c) if subparagraph (b)(i) or (ia) applies—the amount of that reduction; or (d) if subparagraph (b)(ii) or (iii) applies—the amount of that reduction multiplied by the * corporate tax rate. (5B) For the purposes of working out the * cost base or * reduced cost base of a * membership interest under subsection (1), if: (a) either or both of the following things happen after the joining time: (i) money is paid, or becomes required to be paid, in respect of * acquiring the membership interest; (ii) property is given, or becomes required to be given, in respect of acquiring the membership interest; and (b) because the thing happened after the joining time, it was not taken into account in working out the first element of the cost base or reduced cost base of the membership interest; Note: This would be the case if the money was only to be paid etc. if a contingency happened after the joining time. the thing is nevertheless so taken into account, and taken always to have been so taken into account. Non ‑ membership equity interests (6) For the purposes of this section, if at the joining time a * member of the joined group holds a * non ‑ membership equity interest in the joining entity, that non ‑ membership equity interest is treated as if it were a * membership interest in the joining entity.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 107 of 2003, effective Sch 6: 1 July 2003 (s 2(1) item 3) Sch 7 (items 6–8): 30 June 2003 (s 2(1) item 5) Sch 7 (item 15): 17 Dec 2003 (s 2(1) item 7) Remainder: 21 Oct 2003 (s 2(1) items 1, 2, 4, 6, 8) | Amended by No 83 of 2004, effective s 4, Sch 1 (items 116–124), Sch 2 (items 1, 2, 5–8, 10–18, 20–33, 36–50, 52–64, 67–74), Sch 3 (items 4–7), Sch 5 (items 1, 2), Sch 6, Sch 8 (items 9–11), Sch 10 (items 43, 44) and Sch 12: 25 June 2004 (s 2(1) items 1, 12–14, 16, 17, 20, 27, 29, 30) Sch 1 (items 2–79): 30 June 2000 (s 2(1) item 2) Sch 1 (items 85–94): 30 June 2001 (s 2(1) items 3–5) Sch 1 (items 95–99): 24 Oct 2002 (s 2(1) item 6) Sch 1 (item 100): 19 Dec 2002 (s 2(1) item 7) Sch 1 (items 101–104) and Sch 10 (items 23–29, 30–42): 30 June 2003 (s 2(1) items 8, 9, 24–26) Sch 1 (items 105, 106): 17 Dec 2003 (s 2(1) item 10) Sch 10 (items 3–22): 29 June 2002 (s 2(1) item 23) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 97 of 2008, effective Sch 1 (items 3–12) and Sch 3 (items 44–173, 189): 3 Oct 2008 (s 2(1) items 2, 3–5) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-70 — Liabilities of the joining entity—step 2 in working out allocable cost amount

(1) For the purposes of step 2 in the table in section 705 ‑ 60, the step 2 amount is worked out by adding up the amounts of each thing (an accounting liability ) that, in accordance with the joining entity’s * accounting principles for tax cost setting, is a liability of the joining entity at the joining time. Note: Certain liabilities of a life insurance company are worked out under Subdivision 713 ‑ L: see section 713 ‑ 520. Exclusion for deferred tax liability (1B) An amount is not to be added for an accounting liability that is an amount recorded in a deferred tax liability account in accordance with the joining entity’s * accounting principles for tax cost setting. (1C) Subsection (1B) does not apply to an accounting liability that relates to an asset mentioned in paragraph 713 ‑ 515(1)(a) or (b) (certain assets of life insurance company). Exclusion for deductible liability (1AA) Subsection (1AB) applies if: (a) the accounting liability is covered by subsection (1AC); and (b) assuming that the * head company had made a payment to discharge the accounting liability to the extent that it is covered under that subsection just after the joining time, that payment would result in an amount equal to all or part of the accounting liability being a deduction to the head company of the group. (1AB) An amount is not to be added for the accounting liability under subsection (1) to the extent of that deduction. (1AC) A liability is covered by this subsection except to the extent that: (a) any of the following provisions apply in relation to the liability: (i) section 713 ‑ 520 (certain liabilities etc. of life insurance company that joins a consolidated group); (ii) section 715 ‑ 375 (accounting liabilities that are, or are part of, a Division 230 financial arrangement held by an entity that joins a consolidated group); or (b) section 713 ‑ 515 (certain assets taken to be retained cost base assets where life insurance company joins a consolidated group) applies in relation to an asset to which the liability relates; or (c) the liability is either of the following: (i) the * liability for incurred claims of a * general insurance company or of a private health insurer (within the meaning of the Private Health Insurance (Prudential Supervision) Act 2015 ) under * general insurance policies; (ii) the * liability for remaining coverage of a general insurance company or of a private health insurer (within the meaning of that Act) under general insurance policies; or (d) the liability arises under any of the following: (i) a * retirement village residence contract; (ii) a * retirement village services contract. (1AD) To avoid doubt, for the purposes of paragraph (1AC)(c), section 713 ‑ 710 (certain liabilities, reserves, costs etc. of general insurance company that joins or leaves a consolidated group) does not affect the amount of the liability. Exclusion where transfer of accounting liability (2) An amount is not to be added for an accounting liability that arises because of the joining entity’s ownership of an asset if, on * disposal of the asset, the accounting liability will transfer to the new owner. Example: A liability to rehabilitate a mine site, where, under legislation or a licence, the liability will be transferred to the new owner on disposal of the mine. Note: Adjustments reducing or increasing the amount under this section are made by sections 705 ‑ 75 to 705 ‑ 85. Joining entity’s accounting principles for tax cost setting (3) The joining entity’s accounting principles for tax cost setting are the * accounting principles that the entity would use if it were to prepare its financial statements just before the joining time. Exclusion of amounts for certain securitisation liabilities (4) An amount is not to be added for an accounting liability of the joining entity under subsection (1) if the accounting liability is covered under section 705 ‑ 76 (securitisation liabilities).

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4) | Amended by No 52 of 2024, effective sch 3 (items 1 ‑ 5): 29 June 2024 (s 2(1) item 3) sch 4 ‑ 7: 1 July 2024 (s 2(1) item 4)

s 705-75 — Liabilities of the joining entity—reductions for purposes of step 2 in working out allocable cost amount

Reduction for future deduction (1A) Subsection (1) applies to an accounting liability to the extent that it is a liability of a kind described in: (a) paragraph 705 ‑ 70(1AC)(c); or (b) paragraph 705 ‑ 70(1AC)(d). (1) If some or all of an accounting liability will result in a deduction to the * head company, the amount to be added for the accounting liability under subsection 705 ‑ 70(1) is reduced by the following amount: where: double ‑ counting adjustment means the amount of any reduction that has already occurred in the accounting liability under subsection 705 ‑ 70(1) to take account of the future availability of the deduction. Reduction for intra ‑ group liabilities (2) If the amount of an accounting liability of the joining entity that is owed to a * member of the joined group is more than the amount applicable under the following table, the amount to be added for the accounting liability under subsection 705 ‑ 70(1) instead equals the amount applicable under the table. Amount applicable Item If the market value of the member’s asset constituted by the accounting liability is... The amount applicable is... 1 equal to or greater than the asset’s * cost base the asset’s cost base 2 less than the asset’s * cost base but greater than its * reduced cost base the asset’s * market value 3 less than or equal to the asset’s * reduced cost base the asset’s reduced cost base Application of subsections 705 ‑ 65(2), (3), (3AA) and (3A) (3) Subsections 705 ‑ 65(2), (3), (3AA) and (3A) apply in relation to references in subsection (2) of this section to an asset’s * cost base or * reduced cost base in a corresponding way to that in which they apply in relation to references in the table in subsection 705 ‑ 65(1) to a * membership interest’s cost base or reduced cost base. Application of subsection 705 ‑ 65(4) (4) Subsection 705 ‑ 65(4) applies in relation to assets mentioned in subsection (2) of this section in a corresponding way to that in which it applies in relation to members’ * membership interests. Reduction in reduced cost base under subsection 165 ‑ 115ZA(3) to be added back (5) If: (a) in working out the * reduced cost base of a * member’s asset for the purposes of subsection (2), a reduction has taken place under subsection 165 ‑ 115ZA(3) (about alterations in ownership or control of loss companies); and (b) the reduction is to some extent attributable to so much of an amount that was taken into account both in working out the amount of the reduction and in working out: (i) the step 5 amount under section 705 ‑ 100; or (ii) the step 5A amount under section 705 ‑ 102; or (iii) the step 6 amount under section 705 ‑ 110; or (iv) the step 6A amount under section 705 ‑ 112; the reduced cost base is, to the extent mentioned in paragraph (b), increased by: (c) if subparagraph (b)(i) applies—the amount of that reduction; or (d) if subparagraph (b)(ii) applies—the amount of that reduction multiplied by the * corporate tax rate.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 97 of 2008, effective Sch 1 (items 3–12) and Sch 3 (items 44–173, 189): 3 Oct 2008 (s 2(1) items 2, 3–5) | Amended by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4) | Amended by No 64 of 2020, effective Sch 3 (items 72–122): 1 July 2020 (s 2(1) item 5) Sch 3 (items 228–239, 325, 326): 1 Oct 2020 (s 2(1) item 6) Sch 3 (items 327–330): 1 July 2017 (s 2(1) item 7) | Amended by No 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-76 — Liability arising from transfer or assignment of securitised assets

This section covers an accounting liability (the securitisation liability ) if the following circumstances exist: (b) in working out the step 2 amount mentioned in subsection 705 ‑ 70(1) in relation to the joining entity, an amount would be added under that subsection for the securitisation liability (disregarding subsection 705 ‑ 70(4)); (c) the joining entity transferred or equitably assigned one or more assets (the underlying securitised assets ) to another entity before the joining time; (d) the securitisation liability: (i) arose from the transfer or equitable assignment of the underlying securitised assets; and (ii) is a liability of the joining entity at the joining time (according to the joining entity’s * accounting principles for tax cost setting); (e) the other entity was established for the purpose of securitising assets; (f) the underlying securitised assets were securitised in accordance with that purpose before the joining time; (g) at the joining time the * market value of the joining entity’s interest in the underlying securitised assets is nil, or is substantially less than the amount of the securitisation liability.

Amendment history: Inserted by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4) | Amended by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4)

s 705-80 — Liabilities of the joining entity—reductions/increases for purposes of step 2 in working out allocable cost amount

Application (1A) This section applies to an accounting liability to the extent that it is a liability of a kind described in: (a) paragraph 705 ‑ 70(1AC)(c); or (b) paragraph 705 ‑ 70(1AC)(d). Adjustment for unrealised gains and losses (1) If: (a) for income tax purposes, an accounting liability, or a change in the amount of an accounting liability, (other than one owed to a * member of the joined group) is taken into account at a later time than is the case in accordance with the joining entity’s * accounting principles for tax cost setting; and (b) assuming that, for income tax purposes the accounting liability or change were taken into account at the same time as is the case in accordance with those standards or statements, the joined group’s allocable cost amount would be different; Note: The difference would arise because subsection 705 ‑ 70(1) includes income tax liabilities and steps 3 and 5 of the table in section 705 ‑ 60 are affected by the time at which changes in liabilities are taken into account for income tax purposes. then the amount to be added under subsection 705 ‑ 70(1) for the accounting liability is: (c) if the difference is an increase—increased by the amount of the increase; and (d) if the difference is a decrease—decreased by the amount of the decrease. Use of reliable estimate (2) In working out for the purposes of subsection (1) an amount at a particular time or in respect of a particular period, use the most reliable basis for estimation that is available. Example: The amount of a change in liability for employee leave entitlements over a period.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4)

s 705-85 — Liabilities of the joining entity—increases for purposes of step 2 in working out allocable cost amount

Increase in step 2 amount for employee share interests (1) If any * membership interest (an employee share interest ) in the joining entity needed to be disregarded under section 703 ‑ 35 in order for the joining entity to be a * wholly ‑ owned subsidiary of the * head company at the joining time, the step 2 amount worked out under section 705 ‑ 70 is increased by the sum of the * market values of those interests, reduced in each case by the reduction amount (if any) worked out under subsection (2) of this section. Reduction amount (2) There is a reduction amount if the * market value of the employee share interest at the time it was * acquired by the employee is more than the consideration paid or given for its acquisition. The reduction amount is worked out by multiplying the market value of the employee share interest at that time by the factor worked out using the formula: where: market value of all membership interests means the * market value of all * membership interests in the joining entity just before the employee share interest was * acquired. market value of head company’s membership interests means the * market value, just before the employee share interest was * acquired, of any * membership interests that the * head company held, directly or indirectly in the joining entity, continuously from that time until the joining time. Increase to cover certain non ‑ membership equity interests and certain equity interests (3) The step 2 amount worked out under section 705 ‑ 70 is increased by: (a) the amount that would be the balance of the joining entity’s * non ‑ share capital account, assuming that: (i) if the joining entity is not a company—the joining entity were a company; and (ii) each * non ‑ membership equity interest (if any) in the joining entity held at the joining time by a person other than a * member of the joined group were a * non ‑ share equity interest in the joining entity; and (iii) the non ‑ share equity interests (if any) mentioned in subparagraph (ii) were the only non ‑ share equity interests in the joining entity; and (b) the * market value of each thing that, in accordance with the joining entity’s * accounting principles for tax cost setting, is equity in the joining entity at the joining time, where the thing is also a * debt interest. Increase to cover ADI restructure preference share interests (4) If any * share in the joining entity needed to be disregarded under section 703 ‑ 37 in order for the joining entity to be a * wholly ‑ owned subsidiary of the * head company at the joining time, the step 2 amount worked out under section 705 ‑ 70 is increased by the sum of the * market values of those shares.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 117 of 2007, effective 28 June 2007 | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-90 — Undistributed, taxed profits accruing to joined group before joining time—step 3 in working out allocable cost amount

(1) For the purposes of step 3 in the table in section 705 ‑ 60, the step 3 amount is worked out in accordance with this section unless the joining entity is a trust that is not a * corporate tax entity at the joining time. Note: If the joining entity is such a trust, the step 3 amount is instead worked out in accordance with section 713 ‑ 25. Undistributed profits (2) First work out the undistributed profits of the joining entity at the joining time. These are the amounts that, in accordance with the joining entity’s * accounting principles for tax cost setting, are retained profits of the joining entity. (2A) However, if a loss that did not accrue to the joined group before the joining time (subsection (8) states what it means for a loss to accrue to the joined group before the joining time) would be taken into account in working out the undistributed profits, the loss is not so taken into account. (2B) Also, if an amount is not added under subsection 705 ‑ 70(1) for an accounting liability to an extent because of subsection 705 ‑ 70(1AB), the accounting liability is not to be taken into account, to that extent, in working out the undistributed profits. Extent to which tax paid on undistributed profits (3) Then work out how much of the undistributed profits does not exceed the amount worked out using the following formula as at the joining time: where: applicable gross ‑ up rate means the joining entity’s * corporate tax gross ‑ up rate for the income year that ends, or, if section 701 ‑ 30 applies, for the income year that is taken by subsection (3) of that section to end, at the joining time. Assumptions for purposes of subsection (3) (4) The assumptions are that the joining entity’s franking account balance at the end of the income year that ends, or, if section 701 ‑ 30 applies, of the income year that is taken by subsection (3) of that section to end, at the joining time had been adjusted to take account of franking credits or franking debits that would arise if the following were paid just before the joining time: (a) the income tax, or refund of income tax, on the joining entity’s taxable income for that income year; and (b) any income tax, or refund of income tax, that has not yet been paid (regardless of whether it has become payable or due for payment) on the joining entity’s taxable income for any earlier income year, other than one excluded by subsection (5). Exclusion of certain income years where previous membership of a consolidated group (5) If the joining entity was previously a * subsidiary member of a * consolidated group, any income year earlier than the one that started, or, if section 701 ‑ 30 applies, the one that is taken by subsection (3) of that section to have started, when the joining entity ceased to be a subsidiary member of that group is excluded for the purposes of paragraph (4)(b) of this section. Undistributed profits must have accrued to joined group (6) Next, work out the extent to which the undistributed profits that satisfy the requirements of subsection (3) accrued to the joined group before the joining time (subsection (7) states what it means for a profit to accrue to the joined group before the joining time). The result is the step 3 amount. Profit accruing to the joined group before the joining time (7) A profit accrued to the joined group before the joining time if, on the following assumptions: (a) that it was distributed to holders of * membership interests as it accrued; and (b) that entities interposed between the * head company and the joining entity successively distributed any of it immediately after receiving it; it would have been received by the entity that is the head company at the joining time, in respect of membership interests that it held continuously until that time either directly or indirectly through interposed entities. Note: If an entity interposed between the head company and the joining entity is a non ‑ fixed trust, this subsection may involve determining how a power of appointment would have been exercised. Section 713 ‑ 50 lists matters to have regard to in determining this. Loss accruing to the joined group before the joining time (8) A loss accrued to the joined group before the joining time if and to the extent that, assuming that as it arose it were instead a profit that was accruing, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time. Use of reliable estimates (9) In working out: (a) for the purposes of subsection (4), the amount of income tax, or refund of income tax, on the joining entity’s taxable income for a particular income year and the extent to which it has not yet been paid; or (b) for the purposes of subsection (7), the amount of a profit that accrued to the joined group during a particular period; or (c) for the purposes of subsection (8), the amount of a loss that accrued to the joined group during a particular period; use the most reliable basis for estimation that is available. (10) Without limiting paragraph (9)(b), a way in which, for the purposes of subsection (7), the amount of a profit that accrued to the joined group during a particular period may be worked out is by: (a) assuming that profits of income years were distributed in order from the most recent to the earliest; and (b) assuming that, for any income year for which distributions were paid out of profits in accordance with paragraph (a), they were, to the extent they were not * franked distributions, paid out of profits of that income year that were not subject to income tax before they were paid out of such profits that were subject to income tax.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Repealed and substituted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000 | Amended by No 41 of 2005, effective s. 4, Schedule 1 (items 1–11), Schedule 2 (items 1–9, 11), Schedule 3 (items 17–22), Schedule 6 (items 1–3, 5, 12–15, 17–28), Schedule 7, Schedule 10 (items 36–221, 271–273) and Schedule 11 (items 4, 5): Royal Assent Sch 10 (item 247): 28 Dec 2002 (s 2(1) item 9) Sch 10 (items 248, 259, 260): 24 Oct 2002 (s 2(1) items 10, 14, 15) Sch 10 (items 249, 250–257, 263, 264): 29 June 2002 (s 2(1) items 11, 12, 17) Sch 10 (item 258): 30 June 2000 (s 2(1) item 13) Sch 10 (items 261, 262): 1 July 2000 (s 2(1) item 16) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 66 of 2015, effective Sch 1 (items 6–29, 32): 22 June 2015 (s 2(1) items 3, 5) | Amended by No 41 of 2017, effective Sch 2 (item 1), Sch 3 (items 1–21), Sch 4 (items 1–29) and Sch 5 (items 1, 2): 1 July 2016 (s 2(1) items 9, 14, 16, 18) Sch 2 (item 2) and Sch 5 (items 17, 18): repealed before commencing (s 2(1) items 10, 20) Sch 2 (item 3) and Sch 5 (items 19, 20): 1 July 2020 (s 2(1) items 11, 21) Sch 2 (item 4) and Sch 5 (items 21, 22): 1 July 2021 (s 2(1) items 12, 22) Sch 2 (item 5), Sch 3 (item 22) and Sch 4 (item 58): 19 May 2017 (s 2(1) items 13, 15, 17) Sch 5 (items 3–8): 1 July 2017 (s 2(1) item 19) | Amended by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4)

s 705-93 — If pre ‑ joining time roll ‑ over from foreign resident company or head company—step 3A in working out allocable cost amount

When there is a step 3A amount (1) For the purposes of step 3A in the table in section 705 ‑ 60, there is a step 3A amount if: (a) before the joining time: (i) there was a roll ‑ over under Subdivision 126 ‑ B (a Subdivision 126 ‑ B roll ‑ over ) in relation to a * CGT event that happened in relation to an asset (the roll ‑ over asset ); or (ii) former section 160ZZO of the Income Tax Assessment Act 1936 applied in relation to a disposal (a section 160ZZO roll ‑ over ) of an asset (also the roll ‑ over asset ); and (aa) at the joining time, as a result of the Subdivision 126 ‑ B roll ‑ over or the section 160ZZO roll ‑ over, the roll ‑ over asset has: (i) a * deferred roll ‑ over gain; or (ii) a * deferred roll ‑ over loss; and (b) the originating company in relation to the Subdivision 126 ‑ B roll ‑ over, or the transferor in relation to the section 160ZZO roll ‑ over: (i) was a foreign resident; or (ii) is the * head company in relation to the joined group; and (c) the recipient company in relation to the Subdivision 126 ‑ B roll ‑ over, or the transferee in relation to the section 160ZZO roll ‑ over: (i) was an Australian resident; and (ii) is a * spread entity in relation to the joined group; and (d) if the recipient company was previously a * subsidiary member of another consolidated group—the conditions in section 104 ‑ 182 were not satisfied at any time in relation to the other group between the Subdivision 126 ‑ B roll ‑ over, or the section 160ZZO roll ‑ over, and the joining time; and (e) the roll ‑ over asset is not a * pre ‑ CGT asset at the joining time; and (f) the roll ‑ over asset becomes that of the head company of the joined group because subsection 701 ‑ 1(1) (the single entity rule) applies when the joining entity becomes a * subsidiary member of the group. (2) The step 3A amount is the amount of the * deferred roll ‑ over gain or the * deferred roll ‑ over loss mentioned in paragraph (1)(aa).

Amendment history: Inserted by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-95 — Pre ‑ joining time distributions out of certain profits—step 4 in working out allocable cost amount

For the purposes of step 4 in the table in section 705 ‑ 60, the step 4 amount is the sum of all distributions made by the joining entity before the joining time that: (a) the * head company receives directly, or would receive indirectly if entities interposed between the head company and the joining entity successively distributed any distribution they received immediately after receiving it; and (b) were made out of profits: (i) that did not accrue to the joined group before the joining time (see subsection 705 ‑ 90(7)); or (ii) that accrued to the joined group before the joining time and recouped losses of any * sort that accrued to the joined group before that time (see subsection 705 ‑ 90(8)). Note: As well as subsection 705 ‑ 90(7), paragraph 705 ‑ 90(9)(b) and subsection 705 ‑ 90(10) are relevant to working out whether or not profits accrued to the joined group before the joining time.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 23 of 2005, effective s. 4, Schedule 1 (items 2–8, 11, 13–19, 21–24, 26, 27, 29–32), Schedule 2 (items 1–11, 14), Schedule 3 (items 1–13, 75–102, 111(1)–(3)), Schedules 4–6, 8, 10 and Schedule 12 (items 2–6, 11(1)): Royal Assent Schedule 12 (item 1): 1 July 2000

s 705-100 — Losses accruing to joined group before joining time—step 5 in working out allocable cost amount

(1) For the purposes of step 5 in the table in section 705 ‑ 60, the step 5 amount is the sum of all losses of any * sort of the joining entity that: (a) had not been * utilised by the joining entity for the income year in which the joining time occurred or any earlier income year; and (b) accrued to the joined group before the joining time (see subsection 705 ‑ 90(8)). (2) However, a loss is not to be taken into account under subsection (1) to the extent that it reduced the undistributed profits comprising the step 3 amount in the table in section 705 ‑ 60.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3)

s 705-102 — FRT disallowed amounts accruing to joined group before joining time—step 5A in working out allocable cost amount

(1) For the purposes of step 5A in the table in section 705 ‑ 60, the step 5A amount is the sum of all * FRT disallowed amounts of the joining entity that: (a) had not been applied by the joining entity under paragraph 820 ‑ 56(2)(b) for the income year in which the joining time occurred or any earlier income year; and (b) accrued to the joined group before the joining time (see subsection (2) of this section). (2) For the purposes of subsection (1), a * FRT disallowed amount accrued to the joined group before the joining time if and to the extent that, assuming that as it arose it were instead a profit that was accruing, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time. (3) However, a * FRT disallowed amount is not to be taken into account under subsection (1) to the extent that it reduced the undistributed profits comprising the step 3 amount in the table in section 705 ‑ 60.

Amendment history: Inserted by No 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-105 — Continuity of holding membership interests—steps 3 to 5A in working out allocable cost amount

If: (a) a * membership interest that a * member of the joined group held in the joining entity at the joining time was taken under this Act to have been * acquired by the member for its * market value at a particular time (the market value time ); or (b) the * cost base and * reduced cost base of a membership interest that a member of the joined group held in the joining entity at the joining time were, before that time, changed on one or more occasions by this Act so that they equalled the market value of the membership interest at a particular time (the last of which times is also the market value time ); then, for the purpose of sections 705 ‑ 90, 705 ‑ 95, 705 ‑ 100, 705 ‑ 102 and 713 ‑ 25, the * head company is taken not to have held that membership interest, either directly or indirectly, before the market value time.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-110 — If joining entity transfers a loss to the head company—step 6 in working out allocable cost amount

(1) For the purposes of step 6 in the table in section 705 ‑ 60, the step 6 amount is worked out by multiplying the sum of the losses mentioned in subsection (2) by the * corporate tax rate. (2) The losses are the joining entity’s losses of any * sort that: (a) were not * utilised by the joining entity for the income year in which the joining time occurred or any earlier income year; and (b) did not accrue to the joined group before the joining time (see subsection 705 ‑ 90(8)); and (c) are transferred to the * head company under Subdivision 707 ‑ A; and (d) are not cancelled under section 707 ‑ 145.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 97 of 2008, effective Sch 1 (items 3–12) and Sch 3 (items 44–173, 189): 3 Oct 2008 (s 2(1) items 2, 3–5)

s 705-112 — If joining entity transfers a FRT disallowed amount to the head company—step 6A in working out allocable cost amount

(1) For the purposes of step 6A in the table in section 705 ‑ 60, the step 6A amount is worked out by multiplying the sum of the * FRT disallowed amounts mentioned in subsection (2) by the * corporate tax rate. (2) The * FRT disallowed amounts are the joining entity’s FRT disallowed amounts that: (a) did not accrue to the joined group before the joining time (see subsection (3)); and (b) are transferred to the * head company under section 820 ‑ 590; and (c) are not cancelled under section 820 ‑ 592; to the extent that they were not applied by the joining entity under paragraph 820 ‑ 56(2)(b) in respect of the income year in which the joining time occurred or any earlier income year. (3) For the purposes of subsection (2), a * FRT disallowed amount accrued to the joined group before the joining time if and to the extent that, assuming that as it arose it were instead a profit that was accruing, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time.

Amendment history: Inserted by No 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-115 — If head company becomes entitled to certain deductions—step 7 in working out allocable cost amount

(1) For the purposes of step 7 in the table in section 705 ‑ 60, the step 7 amount is worked out using the following formula: where: acquired deductions means all deductions covered by subsection (2) that are not owned deductions. owned deductions means the sum of all deductions for which the following requirements are satisfied: (a) the deduction is covered by subsection (2); (b) assuming the expenditure that gave rise to the deduction were instead a profit that accrued at the time the expenditure was incurred, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time (see subsection 705 ‑ 90(7)). (2) This subsection covers any deduction to which the * head company becomes entitled under section 701 ‑ 5 as a result of the joining entity becoming a * subsidiary member of the joined group, other than a deduction for expenditure: (a) that is, forms part of or reduces, the cost of an asset of the joining entity that becomes an asset of the head company because subsection 701 ‑ 1(1) (the single entity rule) applies; or (b) to which section 110 ‑ 40 (about expenditure on assets acquired before 7.30 pm on 13 May 1997) applies; or (c) to the extent that the expenditure reduced the undistributed profits comprising the step 3 amount in the table in section 705 ‑ 60. (3) Subsection (2) does not cover a deduction under section 43 ‑ 15 (which relates to * undeducted construction expenditure) if the joining entity * acquired the asset to which the deduction relates at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B) | Amended by No 12 of 2012, effective s 4, Sch 2 (items 1–23), Sch 5 and Sch 6 (items 3–6, 11–20, 25, 26, 35–67, 74–83, 94–96, 117–142, 157–178, 183, 200–203, 214–217, 235–240, 248): 21 Mar 2012 (s 2(1) items 1, 3, 5, 6, 10, 14, 18, 19, 27, 31) Sch 6 (item 7): 1 July 2007 (s 2(1) item 7) Sch 6 (item 10): 1 July 2010 (s 2(1) item 9) Sch 6 (items 106–116): 22 Mar 2012 (s 2(1) items 16, 17) Sch 6 (item 143): 22 Jan 2013 (s 2(1) item 20) Sch 6 (items 146–148): never commenced (s 2(1) item 23) Sch 6 (items 179, 181): 3 Oct 2008 (s 2(1) items 28, 30) Sch 6 (item 180): 3 June 2010 (s 2(1) item 29)

s 705-125 — Pre ‑ CGT proportion for joining entity

Object (1) Because intra ‑ group * membership interests in the joining entity are disregarded under subsection 701 ‑ 1(1) (the single entity rule), the object of this section is to provide a mechanism to ensure that the benefit of the pre ‑ CGT status of those interests is not lost. That mechanism involves: (a) working out the proportion (measured by market value) of the membership interests in the joining entity that have pre ‑ CGT status; and (b) if the joining entity later ceases being a member of the group, attaching pre ‑ CGT status to that proportion of membership interests in it (see section 711 ‑ 65), subject to integrity rules (see section 711 ‑ 70). How to work out pre ‑ CGT proportion (2) The pre ‑ CGT proportion is the amount worked out by dividing: (a) the sum of the * market value of each * membership interest in the joining entity that is: (i) held by a * member of the group at the joining time; and (ii) is a * pre ‑ CGT asset; by: (b) the sum of the market value of each membership interest in the joining entity that is held by a member of the group at the joining time. Modification if joining entity is a trust (4) If the joining entity is a trust, a * membership interest in it is not taken into account under subsection (2) unless the membership interest is either a unit or an interest in the trust.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 117 of 2002, effective s 4: 2 Dec 2002 (s 2(1) item 1) Sch 1, 2, Sch 3 (items 1–7), Sch 4, Sch 5 (items 1–12), Sch 6–8, Sch 11 (items 8–11), Sch 12 (items 1–23), Sch 13 (items 1–14) and Sch 14 (items 8–13): 24 Oct 2002 (s 2(1) items 2, 3, 5, 6, 9) Sch 17: 29 June 2002 (s 2(1) item 11) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-130 — What this Subdivision is about

When a consolidated group comes into existence, the tax cost setting amount for the assets of each entity that becomes a subsidiary member is worked out by modifying the rules in Subdivision 705 ‑ A, so that the amount reflects the cost to the group of acquiring the entity. Table of sections Application and object 705 ‑ 135 Application and object of this Subdivision Modified application of Subdivision 705 ‑ A 705 ‑ 140 Subdivision 705 ‑ A has effect with modifications 705 ‑ 145 Order in which tax cost setting amounts are to be worked out where subsidiary members have membership interests in other subsidiary members 705 ‑ 147 Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by subsidiary members in other such members 705 ‑ 155 Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests 705 ‑ 160 Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain entities that become subsidiary members 705 ‑ 163 Modified application of section 705 ‑ 57

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3)

s 705-135 — Application and object of this Subdivision

Application (1) This Subdivision has effect for the head company core purposes set out in subsection 701 ‑ 1(2) if one or more entities become * subsidiary members of a * consolidated group at the time (the formation time ) it comes into existence as a consolidated group. Note: This is the first exception to Subdivision 705 ‑ A: see paragraph 705 ‑ 15(a). Object (2) The object of this Subdivision is to modify the rules in Subdivision 705 ‑ A (which basically determine the tax cost setting amount for assets of an entity joining an existing * consolidated group) so that they have effect, and take account of different circumstances that apply, when a consolidated group comes into existence. Note: The main circumstance is where one of the entities has membership interests in another. In such a case, the order in which the rules in Subdivision 705 ‑ A are applied will affect the tax cost setting amounts for the assets of the entities.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3)

s 705-140 — Subdivision 705 ‑ A has effect with modifications

(1) Subdivision 705 ‑ A has effect in relation to each entity becoming a * subsidiary member of the * consolidated group at the formation time in the same way as that Subdivision has effect in relation to an entity becoming a subsidiary member of a consolidated group in circumstances covered by that Subdivision. (2) However, that effect of Subdivision 705 ‑ A is subject to modifications set out in this Subdivision.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3)

s 705-145 — Order in which tax cost setting amounts are to be worked out where subsidiary members have membership interests in other subsidiary members

Object (1) The object of this section is to ensure that where, on becoming * subsidiary members, entities hold assets consisting of * membership interests in other subsidiary members, the * head company’s cost of becoming the holder of the assets of all of the entities that become subsidiary members correctly reflects the group’s cost of acquiring the entities. Tax cost setting amounts to be worked out from top down (2) If, on becoming * subsidiary members, entities hold * membership interests in any other entities that become subsidiary members, the * tax cost setting amounts for the assets of entities holding membership interests must be worked out before the tax cost setting amounts for the assets of the entities in which the membership interests are held. Note: The tax cost setting amount in respect of assets of any subsidiary member in which the head company, but no other subsidiary member, holds membership interests can be worked out in any order in relation to the calculations for other subsidiary members. Tax cost setting amount for higher entity’s membership interests to be used in working out lower entity’s tax cost setting amount (3) The tax cost setting amount worked out for assets of an entity mentioned in subsection (2) consisting of * membership interests in another such entity is to be used as the amount for those interests under subsection 705 ‑ 65(1) (step 1 of allocable cost amount) in working out the tax cost setting amount for assets of that other entity. Note 1: Subsection 705 ‑ 65(1) adds together amounts worked out in accordance with section 705 ‑ 65 representing the cost of the membership interests that each member of the group holds in the entity. If any of those membership interests is held by another subsidiary member, subsection (3) above will replace the amount otherwise applicable with the tax cost setting amount that will have been worked out for the interests in accordance with subsection (2) above. Note 2: The tax cost setting amount worked out for the membership interests has no relevance other than for the purpose mentioned in subsection (3). This is because, under the single entity principle, intra group membership interests are ignored while entities are members of the group. If an entity ceases to be a member, section 701 ‑ 15 and Division 711 set the tax cost of membership interests in the entity at that time. Value shifting etc. provisions not to apply to later CGT events involving membership interests (4) However, despite subsection (3), subsection 705 ‑ 65(4) (which prevents the later operation of value shifting etc. provisions) still applies to the * membership interests. Non ‑ membership equity interests (5) For the purposes of this section, if, on becoming a * subsidiary member, an entity holds a * non ‑ membership equity interest in another entity that becomes a subsidiary member at the same time, that non ‑ membership equity interest is treated as if it were a * membership interest in that other entity.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-147 — Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by subsidiary members in other such members

Object (1) The object of this section is to modify the effect that section 705 ‑ 93 (step 3A of allocable cost amount) has in accordance with this Subdivision so that it takes account of * membership interests that entities that become * subsidiary members hold in other such entities. Apportionment of step 3A amount among first level interposed entities (2) If: (a) under section 705 ‑ 93, in its application in accordance with this Subdivision, there is a step 3A amount for the purpose of working out the group’s * allocable cost amount for an entity (the subject entity ) that becomes a * subsidiary member of the group at the formation time; and (b) at that time one or more entities (the first level entities ), that become subsidiary members of the group and in which the * head company holds * membership interests, are interposed between the head company and the subject entity; then the step 3A amount is apportioned among the first level entities and the subject entity on the following basis: (c) each first level entity has the following proportion of the step 3A amount: where: market value of all membership interests in subject entity means the * market value, at the formation time, of all * membership interests in the subject entity that are held by entities that become * members of the group at that time. market value of first level entity’s direct and indirect membership interests in subject entity means so much of the * market value of all membership interests in the subject entity (as defined above) as is attributable to * membership interests that the first level entity holds directly, or indirectly through other interposed entities that become * subsidiary members of the group at the formation time; and (d) the subject entity has the remainder of the step 3A amount. Membership interests in subsidiary members of group (3) In applying section 705 ‑ 93 for the purposes of this Subdivision, disregard paragraph 705 ‑ 93(1)(f) if: (a) the rollover asset mentioned in that section is a * membership interest in an entity that becomes a * subsidiary member at the formation time; and (b) the rollover asset is not held at that time by the entity that becomes the * head company of the group. Note: The step 3A amount is worked out under section 705 ‑ 93.

Amendment history: Inserted by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 58 of 2006, effective s. 4, Schedules 1, 2, Schedule 3 (items 1–3, 7), Schedule 4, Schedule 5 (items 1–3) and Schedule 7 (items 51–113, 213–216, 257–263): Royal Assent Sch 7 (items 179–188): 1 July 2004 (s 2(1) item 15) Sch 7 (item 189): 5 July 1999 (s 2(1) item 16) Sch 7 (item 190): 30 June 2000 (s 2(1) item 17) Sch 7 (item 191): 24 Oct 2002 (s 2(1) item 18) Sch 7 (item 192): 30 June 2004 (s 2(1) item 19) Sch 7 (item 193): 22 Dec 1999 (s 2(1) item 20) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | Amended by No 56 of 2010, effective s. 4, Schedule 3 (items 2–7, 10(1)–(4)), Schedule 4, Schedule 5 (items 1–3, 3A, 3B, 4–53, 55–72, 78–110, 112–129, 131–136, 141–146, 146A, 147, 148, 148A, 149, 150, 150A–150F, 151–188, 193–220) and Schedule 6 (items 1–11, 19–26, 56, 57, 115, 127–155): 3 June 2010 Schedule 2 (items 2, 4): 4 June 2010 Sch 5 (item 111): 26 Mar 2009 (s 2(1) item 11B)

s 705-155 — Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests

Object (1) The object of this section is to ensure that, in working out the group’s * allocable cost amount for entities that become * subsidiary members of the group at the formation time, the reduction under step 4 in the table in section 705 ‑ 60 (about pre ‑ formation time distributions out of certain profits) is made only for profits that have been effectively distributed to the * head company in respect of its direct * membership interests in the entities. This ensures consistency with the ordering rule in section 705 ‑ 145. When section applies (2) This section applies to a distribution (the subject distribution ) to the extent that the following conditions are satisfied: (a) the distribution is made by an entity (the subject entity ) that becomes a * subsidiary member of the group at the formation time; (b) in working out the group’s * allocable cost amount for the subject entity there would, apart from this section, be a reduction under step 4 in the table in section 705 ‑ 60 for the distribution. Step 4 reduction only if subject distribution is made to head company etc. (3) There is no reduction as mentioned in paragraph (2)(b) for the subject distribution unless: (a) the subject distribution is made to the * head company of the group; or (b) the reduction is in accordance with subsection (5). Step 4 reduction for effective distribution to head company (4) If: (a) at the formation time, the * head company of the group has a direct * membership interest in the subject entity; and (b) the head company acquired the membership interest directly from another entity, or indirectly as a result of one or more acquisitions from other entities, where: (i) former section 160ZZ0 of the Income Tax Assessment Act 1936 applied to each acquisition; or (ii) there was a roll ‑ over under Subdivision 126 ‑ B for each acquisition; or a combination of these happened; and (c) while it held the membership interest, the entity, or one of the entities, mentioned in paragraph (b) (the recipient of the further distribution ) received a distribution (the further distribution ) of some of the subject distribution from the subject entity; the consequences in subsections (5) and (6) apply. Reduction for further distribution that remains with recipient (5) If: (a) the following happen: (i) by the formation time, any of the further distribution (the eligible reduction amount ) had not again been distributed by the recipient of the further distribution; (ii) the recipient of the further distribution does not become a * subsidiary member of the group at the formation time; or (b) the following happen: (i) by the formation time, any of the further distribution (the eligible reduction amount ) had been distributed by the recipient of the further distribution to another entity directly, or indirectly though successive distributions by interposed entities; (ii) that other entity does not become a subsidiary member of the group at the formation time; or (c) both of the above paragraphs apply; then, in working out the group’s * allocable cost amount for the subject entity, the reduction under step 4 in the table in section 705 ‑ 60 for the subject distribution only takes place to the extent that it equals the sum of all eligible reduction amounts. Step 1 reduced cost base adjustment to reverse effect of reduction for further distribution (6) Also, if former subsection 160ZK(5) of the Income Tax Assessment Act 1936 or subsection 110 ‑ 55(7) of this Act applied to the further distribution, then for the purposes of step 1 in the table in section 705 ‑ 60 in working out the group’s * allocable cost amount for the subject entity: (a) the reference in subsection 705 ‑ 65(3) to a reduction resulting from the application of former subsection 160ZK(5) of the Income Tax Assessment Act 1936 ; and (b) the reference in subsection 705 ‑ 65(5) to a reduction that has taken place under subsection 110 ‑ 55(7); include a reference to the reduction in the * reduced cost base of the membership interest in the subject entity resulting from the application of former subsection 160ZK(5) of the Income Tax Assessment Act 1936 , or subsection 110 ‑ 55(7) of this Act, to the further distribution.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 1–6, 12, Sch 14 (items 1–15, 17–19), Sch 15 (items 1, 3–15, 19–89) and Sch 16 (items 1, 21–55): 24 Oct 2002 (s 2(1) items 1, 2, 4, 5) Sch 13: 29 June 2002 (s 2(1) item 3) | Repealed and substituted by No 16 of 2003, effective s 4: 11 Apr 2003 (s 2(1) item 1) Sch 1 (items 1–6, 9–26), Sch 2, 3, Sch 4 (items 1–7), Sch 5 (items 2–5), Sch 6 (items 1–9), Sch 7 (items 1, 2, 4–29), Sch 8, Sch 9 (items 1, 2, 13–21), Sch 10 (item 2), Sch 11 (items 1–3), Sch 12, 13, Sch 14 (items 1–7), Sch 16 (items 1–3), Sch 19 (items 1–3), Sch 21, 22, Sch 23 (items 10–13) and Sch 24 (items 20–23): 24 Oct 2002 (s 2(1) items 1A, 2–11, 13, 14) Sch 7 (item 3): ( see Sch 10 (item 224) of Act No. 41, 2005) Sch 25 (items 1–10), Sch 26 (items 1–4, 8), Sch 27 (items 1–19, 21), Sch 28 (items 1–12, 19), Sch 29 (items 12, 13) and Sch 30 (items 1, 2): 29 June 2002 (s 2(1) items 15–19, 21, 23) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent