Income Tax Assessment Act 1997

s 705-160 — Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain entities that become subsidiary members

Object (1) The object of this section is to prevent a distortion under section 705 ‑ 35 in the allocation of * allocable cost amount to an entity that becomes a * subsidiary member of the group where that entity has direct or indirect * membership interests in another entity that has certain profits or tax losses when it becomes a subsidiary member. Adjustment to allocation of allocable cost amount where direct interest in entity with profits/losses (2) If: (a) an entity becomes a * subsidiary member of the group at the formation time; and (b) the entity has * membership interests in a second entity that becomes a subsidiary member of the group at that time; and (c) in working out the group’s * allocable cost amount for the second entity: (i) an amount is required to be added (the second entity’s profit/loss adjustment amount ) under step 3 in the table in section 705 ‑ 60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the second entity’s profit/loss adjustment amount ) under step 5 in the table in section 705 ‑ 60 (about losses accruing before becoming a subsidiary member of the group); or (iii) an amount is required to be subtracted (also the second entity’s profit/loss adjustment amount ) under step 5A in the table in section 705 ‑ 60 (about * FRT disallowed amounts accruing to a joined group before the joining time); then, for the purposes of working out under section 705 ‑ 35 the * tax cost setting amount for the assets of the first entity, the * market value of the first entity’s membership interests in the second entity is reduced (in a subparagraph (c)(i) case) or increased (in a subparagraph (c)(ii) or (iii) case) by the first entity’s interest in the second entity’s profit/loss adjustment amount (see subsection (3)). First entity’s interest in second entity’s profit/loss adjustment amount (3) The first entity’s interest in the second entity’s profit/loss adjustment amount is worked out using the formula: Adjustment to allocation of allocable cost amount for indirect interest in entity with profits/losses (4) If: (a) an entity becomes a * subsidiary member of the group at the formation time; and (b) the entity has * membership interests in a second entity that becomes a subsidiary member of the group at that time; and (c) the second entity has, directly or indirectly through one or more interposed entities that become subsidiary members of the group at the formation time, membership interests in a third entity that becomes a subsidiary member of the group at that time; and (d) in working out the group’s * allocable cost amount for the third entity: (i) an amount is required to be added (the third entity’s profit/loss adjustment amount ) under step 3 in the table in section 705 ‑ 60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the third entity’s profit/loss adjustment amount ) under step 5 in the table in section 705 ‑ 60 (about losses accruing before becoming a subsidiary member of the group); or (iii) an amount is required to be subtracted (also the third entity’s profit/loss adjustment amount ) under step 5A in the table in section 705 ‑ 60 (about * FRT disallowed amounts accruing to a joined group before the joining time); then, for the purposes of working out under section 705 ‑ 35 the * tax cost setting amount for the assets of the first entity, the * market value of the first entity’s membership interests in the second entity is reduced (in a subparagraph (d)(i) case) or increased (in a subparagraph (d)(ii) or (iii) case) by the first entity’s interest in the third entity’s profit/loss adjustment amount (see subsection (5)). First entity’s interest in third entity’s profit/loss adjustment amount (5) The first entity’s interest in the third entity’s profit/loss adjustment amount is worked out using the formula: where: market value of first entity’s membership interests in third entity held through second entity means the * market value of all * membership interests in the third entity that the first entity holds indirectly through the second entity (including through that entity and one or more other entities that become * subsidiary members of the group and are interposed between the second entity and the third 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) | 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 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 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-163 — Modified application of section 705 ‑ 57

Object (1) The object of this section is to ensure that, in working out * tax cost setting amounts for * trading stock, * depreciating assets, * registered emissions units or * revenue assets of entities that become * subsidiary members of the group at the formation time, section 705 ‑ 57 (about loss of pre ‑ CGT status of certain * membership interests) only applies if the * membership interests held directly by the * head company of the group are affected. Modified application of section 705 ‑ 57—basic modification (2) For the purposes of applying section 705 ‑ 57 in accordance with this Subdivision, a reference in that section to a * membership interest that a * member of the joined group holds in the joining entity at the joining time is taken to be a reference to a * membership interest that the * head company of the * consolidated group holds directly in an entity becoming a * subsidiary member at the formation time. Modified application of section 705 ‑ 57—additional modifications where section 705 ‑ 145 applies (3) Also, if an entity (the first entity ) that becomes a * subsidiary member holds a * membership interest (the subject membership interest ) in another entity (the second entity ) that becomes a subsidiary member, section 705 ‑ 57 (as modified in accordance with subsection (2)) is to be applied in relation to the subject membership interest as follows. (4) First work out whether there would be a reduction under that section in the * tax cost setting amount for the subject membership interest that is used as mentioned in subsection 705 ‑ 145(3) (the subsection 705 ‑ 145(3) tax cost setting amount ) if: (a) the subject membership interest, if it is not a revenue etc. asset of the first entity, were taken to be such an asset; and (b) paragraphs 705 ‑ 57(2)(c) and (d) and subsection 705 ‑ 57(7) did not apply to the subject membership interest. (5) Next, if there would be such a reduction (whose amount is the notional section 705 ‑ 57 reduction amount ): (a) apply section 705 ‑ 57 to reduce the * tax cost setting amount for any revenue etc. asset of the second entity; and (b) if the second entity holds a * membership interest in another entity that becomes a * subsidiary member—apply section 705 ‑ 57 in relation to that interest in accordance with subsection (3) of this section; and for those purposes: (c) the subject membership interest is taken to be a membership interest that the * head company of the group holds directly in the second entity at the formation time; and (d) the requirements of paragraphs 705 ‑ 57(2)(a) and (b) are taken to be satisfied in relation to the subject membership interest; and (e) the subject membership interest is taken to have a * cost base and * reduced cost base equal to the subsection 705 ‑ 145(3) tax cost setting amount; and (f) the subject membership interest is taken to have a loss of pre ‑ CGT status adjustment amount equal to the notional section 705 ‑ 57 reduction amount. Note: If the head company actually held any membership interests in the second entity, or if other entities becoming subsidiary members held membership interests in the second entity to which this subsection also applied, those membership interests would also be taken into account in working out the reduction under paragraph (a) and in applying paragraph (b). Section 705 ‑ 57 not to apply where membership interests effectively acquired on normal market basis (6) If: (a) apart from this subsection, subsection 705 ‑ 57(6) would apply in accordance with this Subdivision to the revenue etc. assets of an entity (the subject entity ) that becomes a * subsidiary member of the group at the formation time; and (b) at the formation time, the * head company of the group holds all of the * membership interests in the subject entity; and (c) subsection 705 ‑ 57(6) would apply because a circumstance covered by subsection 705 ‑ 57(4) (about loss of pre ‑ CGT status because Division 149 etc. applied) existed; and (d) the application of Division 149 of this Act, or the provision of the Income Tax Assessment Act 1936 , as mentioned in paragraph 705 ‑ 57(4)(b) of this Act happened because the entity that became the * head company of the group (the potential head entity ) * acquired all of the * membership interests in the other entity mentioned in that paragraph directly or indirectly from another entity (the vendor ); and (e) at the time of the acquisition, the potential head entity did not control (for value shifting purposes) the vendor, and vice ‑ versa, and another entity did not control (for value shifting purposes) the potential head entity and the vendor; and (f) the acquisition, or each of the acquisitions, mentioned in subsection 705 ‑ 57(4) was a * same asset roll ‑ over or was one to which any of former sections 160ZZN to 160ZZOC, 160ZZPA and 160ZZPJ of the Income Tax Assessment Act 1936 applied; then subsection 705 ‑ 57(6) does not apply as mentioned in paragraph (a) of this subsection.

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 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent | 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 705-170 — What this Subdivision is about

When a consolidated group is acquired by another consolidated group, modifications are made to the operation of Division 701 (the core rules) and Subdivision 705 ‑ A (tax cost setting amount where a single entity joins a consolidated group) basically to ensure that the tax cost setting amount for assets of the acquired group that become those of the acquiring group reflects the cost to the latter group of acquiring the former. Table of sections Application and object 705 ‑ 175 Application and object of this Subdivision Modified application of Division 701 in relation to acquired group etc. 705 ‑ 180 Modifications of Division 701 Modified application of Subdivision 705 ‑ A in relation to acquiring group 705 ‑ 185 Subdivision 705 ‑ A has effect with modifications Modifications of Subdivision 705 ‑ A for the purposes of this Subdivision 705 ‑ 195 Modified application of subsection 705 ‑ 65(6) 705 ‑ 200 Modified application of section 705 ‑ 85

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)

s 705-175 — Application and object of this Subdivision

Application (1) This Subdivision applies if all of the * members of a * consolidated group (the acquired group ) become members of another consolidated group (the acquiring group ) at a particular time (the acquisition time ) as a result of the * acquisition of * membership interests in the * head company of the acquired group. Object (2) The object of this Subdivision is: (a) to modify the rules in Division 701 (the core rules) to complement the treatment of the acquired group as a single entity that applied before the acquisition time; and (b) to modify Subdivision 705 ‑ A (which basically determines the tax cost setting amount for assets of an entity joining a consolidated group) to ensure that the * tax cost setting amount for assets of the acquired group that become those of the acquiring group reflects the cost to the latter group of acquiring the former.

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)

s 705-180 — Modifications of Division 701

Certain provisions of Division 701 not to apply (1) If, because an entity ceases to be a * subsidiary member of the acquired group when this Subdivision applies, a provision of Division 701 (other than section 701 ‑ 25) would otherwise apply, in relation to the acquired group for the head company core purposes set out in subsection 701 ‑ 1(2) or for the entity core purposes set out in subsection 701 ‑ 1(3), the provision does not so apply. Modified application of section 701 ‑ 5 (2) Section 701 ‑ 5 (the entry history rule) applies in relation to the acquiring group for the head company core purposes set out in subsection 701 ‑ 1(2) as if entities that are or have been the * subsidiary members of the acquired group were or had been parts of the * head company of the acquired group. Modified application of section 701 ‑ 25 (3) The application of section 701 ‑ 25 (which ensures tax ‑ neutral consequences for a head company ceasing to hold assets when an entity leaves a group), in relation to the acquired group for the head company core purposes set out in subsection 701 ‑ 1(2) and for the entity core purposes set out in subsection 701 ‑ 1(3), is modified as follows: (a) the reference in subsection (4) of that section to the end of the income year is taken to be a reference to the end of the income year that ends or, if subsection 701 ‑ 30(3) as modified by subsection (4) of this section applies, of the income year that is taken to end, when the entity ceases to be a * subsidiary member of the acquired group; (b) the section applies (as modified by paragraph (a) of this subsection) to the entity that is the * head company of the acquired group ceasing to be a * member of that group in the same way as it applies to an entity that is a subsidiary member of that group ceasing to be a subsidiary member. Modified application of section 701 ‑ 30 (4) If the acquired group only exists for part of the income year, section 701 ‑ 30 (about an entity not being a subsidiary member of a group for a whole income year) applies in relation to the acquired group for the head company core purposes in the same way as it applies to work out the taxable income, tax payable on that taxable income and loss of each * sort for an entity for a non ‑ membership period.

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)

s 705-185 — Subdivision 705 ‑ A has effect with modifications

(1) Subdivision 705 ‑ A has effect in relation to the acquiring group for the head company core purposes set out in subsection 701 ‑ 1(2) as if: (a) the only * member of the acquired group that is a joining entity of the acquiring group were the entity that, just before the acquisition time, was the * head company of the acquired group; and (b) the operation of this Part for the head company core purposes in relation to the head company and the entities that were * subsidiary members of the acquired group continued to have effect for the purposes of Subdivision 705 ‑ A. Note 1: This means that for Subdivision 705 ‑ A purposes the subsidiary members of the acquired group are treated as part of the head company of that group, and as a result their assets (other than e.g. internal membership interests) have their tax costs set at the acquisition time. Note 2: It also means e.g. that for Subdivision 705 ‑ A purposes the terminating values of the assets of those subsidiary members are worked out as if the assets were those of the head company at the acquisition time, and hence will be based (if applicable) on the tax cost setting amounts for assets that were set at the time entities became subsidiary members of the acquired group. (2) However, that effect of Subdivision 705 ‑ A is subject to modifications set out in this Subdivision. Note: The modifications of Subdivision 705 ‑ A made in this Subdivision constitute the second exception to Subdivision 705 ‑ A: see paragraph 705 ‑ 15(b).

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)

s 705-195 — Modified application of subsection 705 ‑ 65(6)

Object (1) The object of this section is to ensure that certain * non ‑ membership equity interests held by * members of the acquiring group that are part of the cost of acquiring the acquired group are taken into account in working out the acquiring group’s * allocable cost amount for the acquired group. Non ‑ membership equity interests (2) Subsection 705 ‑ 65(6) has effect as if it also treated as a * membership interest in the * head company of the acquired group a * non ‑ membership equity interest in a * subsidiary member of the acquired group, where that interest was held at the acquisition time by a * member of the acquiring group.

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 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 705-200 — Modified application of section 705 ‑ 85

Object (1) The object of this section is to ensure that if any of the following are not held by * members of either group: (a) certain employee share interests in * subsidiary members of the acquired group; (b) certain * non ‑ membership equity interests in subsidiary members of the acquired group; (c) certain preference share interests in subsidiary members of the acquired group; and are therefore part of the cost of acquiring the acquired group, they increase the acquiring group’s * allocable cost amount for the acquired group. Increase for certain membership interests in subsidiary members of acquired group (2) Subsections 705 ‑ 85(1), (2) and (4) have effect as if a * membership interest in a * subsidiary member of the acquired group were a membership interest in the * head company of that group. Non ‑ membership equity interests (3) Paragraph 705 ‑ 85(3)(a) has effect as if it also increased the step 2 amount worked out under section 705 ‑ 70 by the amount that would be the sum of the balances of the * non ‑ share capital accounts of the * subsidiary members of the acquired group, assuming that: (a) for a subsidiary member that is not a company—the subsidiary member were a company; and (b) each * non ‑ membership equity interest (if any) in a subsidiary member held at the acquisition time by a person other than a * member of the acquiring group or acquired group were a * non ‑ share equity interest in the subsidiary member; and (c) the non ‑ share equity interests (if any) mentioned in paragraph (b) were the only non ‑ share equity interests in the subsidiary member.

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 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 705-210 — What this Subdivision is about

When entities that are linked by membership interests join a consolidated group, 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 entities. Table of sections Application and object 705 ‑ 215 Application and object of this Subdivision Modified application of Subdivision 705 ‑ A 705 ‑ 220 Subdivision 705 ‑ A has effect with modifications 705 ‑ 225 Order in which tax cost setting amounts are to be worked out where linked entities have membership interests in other linked entities 705 ‑ 227 Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by linked entities in other linked entities 705 ‑ 230 Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests 705 ‑ 235 Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain linked entities 705 ‑ 240 Modified application of section 705 ‑ 57

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)

s 705-215 — 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: (a) 2 or more entities (each of which is a linked entity ) become members of a * consolidated group at the same time as a result of an event that happens in relation to one of them; and (b) the case is not covered by Subdivision 705 ‑ C. Note: This is the third exception to Subdivision 705 ‑ A: see paragraph 705 ‑ 15(c). In order for this Subdivision to have effect, one of the entities would need to hold directly or indirectly, just before the joining time, membership interests in all of the other entities. Example: Entities A and B are not members of a consolidated group, but members of such a group, together with entity A, jointly hold all the membership interests in entity B. Members of the group then acquire all the membership interests in entity A and as a result of this event both entities, which are linked by the membership interests that one holds in the other, become members of the group. 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 take account of the different circumstances that apply where linked entities join.

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)

s 705-220 — Subdivision 705 ‑ A has effect with modifications

(1) Subdivision 705 ‑ A has effect in relation to each linked entity becoming a * subsidiary member of the * consolidated group in the same way as that Subdivision operates 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 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)

s 705-225 — Order in which tax cost setting amounts are to be worked out where linked entities have membership interests in other linked entities

Object (1) The object of this section is to ensure that where, on becoming * subsidiary members, linked entities hold assets consisting of * membership interests in other linked entities, the * head company’s cost of becoming the holder of the assets of all of the linked entities correctly reflects the group’s cost of acquiring the linked entities. Tax cost setting amounts to be worked out from top down (2) The * tax cost setting amounts for the assets of linked entities holding * membership interests must be worked out before the tax cost setting amounts for the assets of the linked entities in which the membership interests are held. Note: The tax cost setting amount in respect of assets of any linked entity in which members of the group, but no linked entity, hold membership interests can be worked out in any order in relation to the calculations for other linked entities. Tax cost setting amount for higher linked entity’s membership interests to be used in working out lower linked entity’s tax cost setting amount (3) The * tax cost setting amount worked out for assets of a linked 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 linked 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 linked entity. If any of those membership interests is held by another linked entity, subsection (3) of this section 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) of this section. 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) of this subsection. 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, a linked entity holds a * non ‑ membership equity interest in another linked entity, that interest is treated as if it were a * membership interest in that other linked entity.

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 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 705-227 — Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by linked entities in other linked entities

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 linked entities hold in other linked entities at the time (the linked entity joining time ) when the linked entities become * subsidiary members of the group. 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 a particular linked entity (the subject entity ); and (b) at the linked entity joining time, one or more of the linked entities (the first level entities ) 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 linked entity joining 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 linked entities; 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 linked entity joining 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 705-230 — 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 the linked entities, 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 ‑ 225. When section applies (2) This section applies to a distribution to the extent that the following conditions are satisfied: (a) the distribution is made by a linked entity; (b) in working out the group’s * allocable cost amount for the linked 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 (3) There is no reduction as mentioned in subsection (2) for the distribution unless it is made to the * head company of the group.

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) | 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 705-235 — Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain linked entities

Object (1) The object of this section is to prevent a distortion under section 705 ‑ 35 in the allocation of * allocable cost amount to a linked entity where that entity has direct or indirect * membership interests in another linked entity that has certain profits or tax losses. Adjustment to allocation of allocable cost amount where direct interest in linked entity with profits/losses (2) If: (a) a linked entity has * membership interests in a second linked entity; and (b) in working out the group’s * allocable cost amount for the second linked entity: (i) an amount is required to be added (the second linked entity’s profit/loss adjustment amount ) under step 3 in the table in section 705 ‑ 60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the second linked entity’s profit/loss adjustment amount ) under step 5 in the table in section 705 ‑ 60 (about losses accruing before becoming a subsidiary member of the group); or (iii) an amount is required to be subtracted (also the second linked entity’s profit/loss adjustment amount ) under step 5A in the table in section 705 ‑ 60 (about * FRT disallowed amounts accruing to a joined group before the joining time); then, for the purposes of working out under section 705 ‑ 35 the * tax cost setting amount for the assets of the first linked entity, the * market value of the first linked entity’s membership interests in the second linked entity is reduced (in a subparagraph (b)(i) case) or increased (in a subparagraph (b)(ii) or (iii) case) by the first linked entity’s interest in the second linked entity’s profit/loss adjustment amount (see subsection (3)). First linked entity’s interest in second linked entity’s profit/loss adjustment amount (3) The first linked entity’s interest in the second linked entity’s profit/loss adjustment amount is worked out using the formula: Adjustment to allocation of allocable cost amount for indirect interest in linked entity with profits/losses (4) If: (a) a linked entity has * membership interests in a second linked entity; and (b) the second linked entity has, directly or indirectly through one or more interposed linked entities, membership interests in a third linked entity; and (c) in working out the group’s * allocable cost amount for the third linked entity: (i) an amount is required to be added (the third linked entity’s profit/loss adjustment amount ) under step 3 in the table in section 705 ‑ 60 (about profits accruing before becoming a subsidiary member of the group); or (ii) an amount is required to be subtracted (also the third linked entity’s profit/loss adjustment amount ) under step 5 in the table in section 705 ‑ 60 (about losses accruing before becoming a subsidiary member of the group); or (iii) an amount is required to be subtracted (also the third linked entity’s profit/loss adjustment amount ) under step 5A in the table in section 705 ‑ 60 (about * FRT disallowed amounts accruing to a joined group before the joining time); then, for the purposes of working out under section 705 ‑ 35 the * tax cost setting amount for the assets of the first linked entity, the * market value of the first linked entity’s membership interests in the second linked entity is reduced (in a subparagraph (c)(i) case) or increased (in a subparagraph (c)(ii) or (iii) case) by the first linked entity’s interest in the third linked entity’s profit/loss adjustment amount (see subsection (5)). First linked entity’s interest in third linked entity’s profit/loss adjustment amount (5) The first linked entity’s interest in the third linked entity’s profit/loss adjustment amount is worked out using the formula: where: market value of first linked entity’s membership interests in third linked entity held through second linked entity means the * market value of all * membership interests in the third linked entity that the first linked entity holds indirectly through the second linked entity (including through that entity and one or more other linked entities that are interposed between the second linked entity and the third linked entity).

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) | 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 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 23 of 2024, effective sch 2 (items 3 ‑ 142, 144 ‑ 146): 1 July 2024 (s 2(1) item 3)

s 705-240 — Modified application of section 705 ‑ 57

Object (1) The object of this section is to ensure that, in working out * tax cost setting amounts for * trading stock, * depreciating assets, * registered emissions units or * revenue assets of the linked entities, section 705 ‑ 57 (about loss of pre ‑ CGT status of certain membership interests) only applies if the * membership interests held directly by the * head company of the group are affected. Modified application of section 705 ‑ 57—basic modification (2) For the purposes of applying section 705 ‑ 57 in accordance with this Subdivision, a reference in that section to a * membership interest that a * member of the joined group holds in the joining entity at the joining time is taken to be a reference to a membership interest that the * head company of the * consolidated group holds directly in a linked entity at the time the linked entity becomes a * subsidiary member. Modified application of section 705 ‑ 57—additional modifications where section 705 ‑ 225 applies (3) Also, if a linked entity (the first linked entity ) holds a * membership interest (the subject membership interest ) in another linked entity (the second linked entity ), section 705 ‑ 57 (as modified in accordance with subsection (2)) is to be applied in relation to the subject membership interest as follows. (4) First work out whether there would be a reduction under that section in the * tax cost setting amount for the subject membership interest that is used as mentioned in subsection 705 ‑ 225(3) (the subsection 705 ‑ 225(3) tax cost setting amount ) if: (a) the subject membership interest, if it is not a revenue etc. asset of the first linked entity, were taken to be such an asset; and (b) paragraphs 705 ‑ 57(2)(c) and (d) and subsection 705 ‑ 57(7) did not apply to the subject membership interest. (5) Next, if there would be such a reduction (whose amount is the notional section 705 ‑ 57 reduction amount ): (a) apply section 705 ‑ 57 to reduce the * tax cost setting amount for any revenue etc. asset of the second linked entity; and (b) if the second linked entity holds a * membership interest in another linked entity—apply section 705 ‑ 57 in relation to that interest in accordance with subsection (3) of this section; and for those purposes: (c) the subject membership interest is taken to be a membership interest that the * head company of the group holds directly in the second linked entity; and (d) the requirements of paragraphs 705 ‑ 57(2)(a) and (b) are taken to be satisfied in relation to the subject membership interest; and (e) the subject membership interest is taken to have a * cost base and * reduced cost base equal to the subsection 705 ‑ 225(3) tax cost setting amount; and (f) the subject membership interest is taken to have a loss of pre ‑ CGT status adjustment amount equal to the notional section 705 ‑ 57 reduction amount. Note: If the head company actually held any membership interests in the second linked entity, or if other linked entities held membership interests in the second linked entity to which this subsection also applied, those membership interests would also be taken into account in working out the reduction under paragraph (a) and in applying paragraph (b).

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 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 705-300 — What this Subdivision is about

Errors in making tax cost setting amount calculations are reversed by means of an immediate capital gain or loss if it would be unreasonable to require the calculations to be re ‑ done. Table of sections Operative provisions 705 ‑ 305 Object of this Subdivision 705 ‑ 310 Operation of Part IVA of the Income Tax Assessment Act 1936 705 ‑ 315 Errors that attract special adjustment action 705 ‑ 320 Tax cost setting amounts taken to be correct

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 705-305 — Object of this Subdivision

The object of this Subdivision is to avoid the time and expense involved in correcting errors affecting * tax cost setting amount calculations. This is done by providing for * capital gains or * capital losses to reverse the errors.

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 705-310 — Operation of Part IVA of the Income Tax Assessment Act 1936

To avoid doubt, this Subdivision does not limit the operation of Part IVA of the Income Tax Assessment Act 1936 .

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 705-315 — Errors that attract special adjustment action

(1) Section 705 ‑ 320 (about later adjustments to correct * tax cost setting amount calculation errors) applies if the conditions in this section are satisfied. Tax cost setting amount taken into account (2) The first condition is that the * head company of a * consolidated group worked out a * tax cost setting amount, in purported compliance with this Division, for an asset of an entity that becomes a * subsidiary member of the group that is an asset of a kind referred to in section 705 ‑ 35 as a reset cost base asset. Error in calculation (3) The second condition is that: (a) the * head company made one or more errors in working out the * tax cost setting amount; and (b) those errors caused the tax cost setting amount to differ from its correct amount. If the errors caused the tax cost setting amount to be more, the difference is an overstated amount . If the errors caused the tax cost setting amount to be less, the difference is an understated amount . Unreasonable to require recalculation (4) The third condition is that, having regard to the following factors: (a) the net size of the errors compared to the size of the * allocable cost amount for the joining entity; (b) the number of * tax cost setting amounts that would have to be recalculated, and the difficulty of making the recalculations; (c) the number of adjustments, in assessments that could be amended and in future * income tax returns, that would be necessary to correct the errors; (d) the difficulty in obtaining any necessary information; it is not reasonable to require a recalculation of the amounts involved. Exception where error due to fraud or evasion (5) However, the conditions in this section are not satisfied if the errors were to any extent due to fraud or evasion. Requirement to notify (6) The * head company of the * consolidated group must, as soon as practicable after becoming aware that it made one or more errors in working out the * tax cost setting amount, notify the Commissioner in the * approved form: (a) that it had made the errors; and (b) of the amount of the overstated amount or understated amount.

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 705-320 — Tax cost setting amounts taken to be correct

(1) For the purposes of this Act (other than this Subdivision) and for the purposes of the Taxation Administration Act 1953 , any * tax cost setting amounts that were worked out by the * head company, so far as they were due to the errors, are taken to have been correct if the conditions in section 705 ‑ 315 are satisfied. Note 1: If the conditions in section 705 ‑ 315 are satisfied, CGT event L6 happens (see section 104 ‑ 525). Note 2: Subsection (1) means that the Commissioner cannot amend any assessments necessary to correct the errors, and that (except as mentioned in subsection (2)) no offences or administrative penalties arise in respect of the errors. (2) Subsection (1) does not apply for the purposes of determining whether there is an offence against section 8N of the Taxation Administration Act 1953 , or an administrative penalty under section 284 ‑ 75 or 284 ‑ 145 in Schedule 1 to that Act, in relation to statements made before the Commissioner became aware of the errors. Note 1: Section 8N of the Taxation Administration Act 1953 deals with false or misleading statements. Sections 284 ‑ 75 and 284 ‑ 145 in Schedule 1 to that Act set out the circumstances in which an entity is liable for an administrative penalty. Note 2: The offence and administrative penalty provisions however apply on a modified basis—see subsection 8W(1C) of the Taxation Administration Act 1953 , and subsections 284 ‑ 80(2) and 284 ‑ 150(2) in Schedule 1 to that Act.

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 707-100 — What this Subdivision is about

A loss made by an entity before the time it becomes a member of a consolidated group is transferred to the head company of the group at that time if the entity could have utilised the loss had the entity not become a member of the group. Table of sections 707 ‑ 105 Who can utilise the loss? Objects 707 ‑ 110 Objects of this Subdivision Application 707 ‑ 115 What losses this Subdivision applies to Transfer of loss from joining entity to head company 707 ‑ 120 Transfer of loss from joining entity to head company 707 ‑ 125 Modified business continuity test for companies’ post ‑ 1999 losses 707 ‑ 130 Modified pattern of distributions test 707 ‑ 135 Transferring loss transferred to joining entity because business continuity test was satisfied Effect of transfer of loss 707 ‑ 140 Effect of transfer of loss Cancelling the transfer of the loss 707 ‑ 145 Cancelling the transfer of the loss What happens if the loss is not transferred? 707 ‑ 150 Loss cannot be utilised for income year ending after the joining time

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 88 of 2013, effective s 4, Sch 1 (items 1–18), Sch 3 and Sch 7 (items 200–210, 236–242): 28 June 2013 (s 2(1) items 1, 2, 5, 21, 26) Sch 1 (items 33, 34): 1 July 2013 (s 2(1) item 3) Sch 5 (items 1–5, 7–9) and Sch 6 (items 3–41, 50–65): 29 June 2013 (s 2(1) items 8, 9, 14) Sch 7 (items 1–4): 1 July 2012 (s 2(1) item 15)

s 707-105 — Who can utilise the loss?

(1) If the loss is transferred, the head company is treated for income years ending after the transfer as having made the loss, so the head company can utilise the loss for those income years to the extent permitted by: (a) the general rules (outside this Part) about an entity utilising a loss it has made; and (b) the special rules about transferred losses in the other Subdivisions of this Division that supplement and modify those general rules. Note: If the entity from which the loss was transferred became a subsidiary member of the consolidated group, the entity cannot utilise the loss for those income years because of section 701 ‑ 1 (single entity rule) and section 707 ‑ 140. (2) If the loss is not transferred, then, for an income year ending after the time the entity became a member of the consolidated group, the loss cannot be utilised by any entity. Note: The loss will not be transferred if the entity would not have been able to utilise it or if the transfer is cancelled under section 707 ‑ 145.

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

s 707-110 — Objects of this Subdivision

The main objects of this Subdivision are: (a) to provide for the transfer of a loss from an entity (the joining entity ) becoming a * member of a * consolidated group to the * head company of the group (so the head company may be able to * utilise it), if the joining entity could have utilised the loss if it had not become a member of the group; and (b) to prevent the utilisation by any entity of a loss made by the joining entity, if the joining entity could not have utilised the loss if it had not become a member of the group.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 143 of 2007, effective Schedule 1 (items 1, 4, 128–194, 222, 223, 225, 226), Schedule 2, Schedule 5 (items 1–16, 48(1)–(3)), Schedule 6 and Schedule 7 (items 18–68): Royal Assent Schedule 5 (items 31–46): 15 Mar 2007 (s 2(1) item 6) | Amended by No 88 of 2013, effective s 4, Sch 1 (items 1–18), Sch 3 and Sch 7 (items 200–210, 236–242): 28 June 2013 (s 2(1) items 1, 2, 5, 21, 26) Sch 1 (items 33, 34): 1 July 2013 (s 2(1) item 3) Sch 5 (items 1–5, 7–9) and Sch 6 (items 3–41, 50–65): 29 June 2013 (s 2(1) items 8, 9, 14) Sch 7 (items 1–4): 1 July 2012 (s 2(1) item 15)

s 707-115 — What losses this Subdivision applies to

This Subdivision applies to a loss of any * sort if: (a) an entity (the joining entity ) becomes a * member of a * consolidated group (the joined group ) at a time (the joining time ) in an income year (the joining year ); and (b) the loss was made by the joining entity for an income year ending before the joining time. Note 1: If the joining entity had a loss transferred to it by a previous operation of this Subdivision (when the entity was the head company of a consolidated group), this Subdivision operates later as if the joining entity had made the loss. See section 707 ‑ 140. Note 2: Section 707 ‑ 405 may affect the income year for which the joining entity is treated as having made the loss, if the joining entity made the loss and the loss is referable to part of an income year.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 88 of 2013, effective s 4, Sch 1 (items 1–18), Sch 3 and Sch 7 (items 200–210, 236–242): 28 June 2013 (s 2(1) items 1, 2, 5, 21, 26) Sch 1 (items 33, 34): 1 July 2013 (s 2(1) item 3) Sch 5 (items 1–5, 7–9) and Sch 6 (items 3–41, 50–65): 29 June 2013 (s 2(1) items 8, 9, 14) Sch 7 (items 1–4): 1 July 2012 (s 2(1) item 15)

s 707-120 — Transfer of loss from joining entity to head company

Transfer of loss from joining entity to head company (1) Subject to subsection (1A), the loss is transferred at the joining time from the joining entity to the * head company of the joined group (even if they are the same entity). (1A) The loss is transferred under subsection (1) only to the extent (if any) that the loss could have been * utilised by the joining entity for an income year consisting of the * trial year if: (a) at the joining time, the joining entity had not become a * member of the joined group (but had been a * wholly ‑ owned subsidiary of the * head company if the joining entity is not the head company); and (b) the amount of the loss that could be utilised for the trial year were not limited by the joining entity’s income or gains for the trial year. What is the trial year ? (2) The trial year is the period: (a) starting at the latest of these times: (i) the time 12 months before the joining time; (ii) the time the joining entity came into existence; (iii) the time the joining entity last ceased to be a * subsidiary member of a * consolidated group, if the joining entity had been a member of a consolidated group before the joining time but was not a * member of a consolidated group just before the joining time; and (b) ending just after the joining time. Business continuity test involving trial year (3) When working out whether the joining entity carried on, throughout the * trial year (or a period including the trial year): (a) the same business as the business it carried on at a particular time; or (b) a similar business to the business it carried on at that time; assume that the entity carried on at and just after the joining time the same business that it carried on just before the joining time. Transfer of loss for income year overlapping trial year (4) If the loss was made by the joining entity for an income year all or part of which occurs in the * trial year, the transfer of the loss under subsection (1) is not prevented by the fact that the loss was made for that income year. Designated infrastructure project entities (5) Despite subsection (1A), the loss is transferred under subsection (1) to the full extent if: (a) the loss is a * tax loss; and (b) the joining entity is a * designated infrastructure project entity: (i) at a time in the * loss year; and (ii) just before the joining time.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | 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 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 124 of 2013, effective Sch 1 (items 37–45), Sch 5 (items 7, 8(1)), Sch 7, Sch 8, Sch 10 (items 1–11, 13): 29 June 2013 (s 2(1) items 2, 10–12) Sch 2 (items 2–6, 21–42, 48): 11 July 2013 (s 2(1) item 3) Sch 2 (item 66): 11 July 2013 (s 2(1) item 5) Sch 10 (item 14): never commenced (s 2(1) item 13) Sch 11 (items 1–3): 3 Dec 2012 (s 2(1) item 15) Sch 11 (items 5, 6, 9): 28 June 2013 (s 2(1) item 16) Sch 11 (items 28, 32(1), 35–56): 30 June 2013 (s 2(1) items 18, 20, 22) | Amended by No 7 of 2019, effective Sch 1 (items 1–13, 33–164): 1 Apr 2019 (s 2(1) item 1)

s 707-125 — Modified business continuity test for companies’ post ‑ 1999 losses

(1) This section operates if: (a) the joining entity made the loss for an income year starting after 30 June 1999; and (b) section 165 ‑ 13 or subsection 165 ‑ 15(2) or (3) or 166 ‑ 5(5) or (6) is relevant to working out (under section 707 ‑ 120) whether the loss is transferred from the joining entity. (2) Work out whether the loss is transferred on the basis that section 165 ‑ 13 required the joining entity to satisfy the * business continuity test for: (a) the period (the business continuity test period ) consisting of: (i) the * trial year; and (ii) the income year that included the * test time worked out for section 165 ‑ 13 for the joining entity (disregarding paragraph (b) of this subsection), if that income year started before the trial year; and (b) the time (the test time ) just before the end of the income year for which the loss was made by the joining entity. (3) Work out whether the loss is transferred on the basis that: (a) subsection 165 ‑ 15(2) specified that the period (the business continuity test period ) for the * business continuity test consisted of: (i) the * trial year; and (ii) the income year in which the person began to control, or became able to control, the voting power in the company, if that income year started before the trial year; and (b) subsection 165 ‑ 15(3) required the business continuity test to be applied to the company’s business immediately before the time (the test time ) just before the end of the income year for which the loss was made by the joining entity. (4) If Subdivision 166 ‑ A would apply to the joining entity for an income year consisting of the * trial year, work out whether the loss is transferred on the basis that: (a) subsection 166 ‑ 5(5) treated the joining entity as having satisfied the condition in section 165 ‑ 13 if the joining entity satisfied the * business continuity test for the period (the business continuity test period ) consisting of: (i) the trial year; and (ii) the income year described in subsection (5) of this section, if that income year started before the trial year; and (b) subsection 166 ‑ 5(6) required the business continuity test to be applied to the * business that the joining entity carried on at the time (the test time ) just before the end of the income year for which the loss was made by the joining entity. Note: Subdivision 166 ‑ A applies to widely held companies and eligible Division 166 companies unless they choose that Subdivision 165 ‑ A apply to them without the modifications made by Subdivision 166 ‑ A. (5) For the purposes of subparagraph (4)(a)(ii), the income year is: (a) the income year in which occurred the first time mentioned in subsection 166 ‑ 5(6); or (b) the income year of the joining entity containing the time at which the joining entity is taken under subsection 707 ‑ 210(5) to fail to meet the condition in section 165 ‑ 12, if that subsection is relevant to working out whether the joining entity can * utilise the loss. Note 1: Section 707 ‑ 205 affects the start of the test period if the joining entity made the loss under a previous operation of this Subdivision. Note 2: Section 707 ‑ 210 is about whether a company can utilise certain losses transferred to it under this Subdivision from a company. (6) Subsection (4) of this section has effect despite subsection 707 ‑ 210(6). Note: Subsection 707 ‑ 210(6) modifies section 166 ‑ 5 for working out whether a company can utilise certain losses transferred to it under this Subdivision from a company.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 142 of 2003, effective s 4, Sch 1 (items 1–15, 18–40), Sch 2 (items 1, 2, 4–29, 33–49, 52, 53), Sch 3, Sch 7 (items 1–23) and Sch 8 (items 4–17, 17A, 17B, 18–21, 24(2), (3)): 17 Dec 2003 (s 2(1) items 1–5, 10, 11, 13) | 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 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 124 of 2013, effective Sch 1 (items 37–45), Sch 5 (items 7, 8(1)), Sch 7, Sch 8, Sch 10 (items 1–11, 13): 29 June 2013 (s 2(1) items 2, 10–12) Sch 2 (items 2–6, 21–42, 48): 11 July 2013 (s 2(1) item 3) Sch 2 (item 66): 11 July 2013 (s 2(1) item 5) Sch 10 (item 14): never commenced (s 2(1) item 13) Sch 11 (items 1–3): 3 Dec 2012 (s 2(1) item 15) Sch 11 (items 5, 6, 9): 28 June 2013 (s 2(1) item 16) Sch 11 (items 28, 32(1), 35–56): 30 June 2013 (s 2(1) items 18, 20, 22) | Amended by No 7 of 2019, effective Sch 1 (items 1–13, 33–164): 1 Apr 2019 (s 2(1) item 1)

s 707-130 — Modified pattern of distributions test

(1) This section operates for the purpose of working out (under section 707 ‑ 120) whether the loss is transferred from the joining entity, if section 267 ‑ 20 in Schedule 2F to the Income Tax Assessment Act 1936 is relevant for that purpose. Note 1: That section is relevant if the joining entity has been a non ‑ fixed trust at any time in the period from the start of the income year in which the entity made the loss until the time it became a subsidiary member of the joined group (and was not an excepted trust at all times in the period). Note 2: That section prevents an entity from utilising a tax loss unless the entity meets the conditions in subsection 267 ‑ 30(2) (if applicable) and section 267 ‑ 35 in that Schedule by passing the pattern of distributions test for certain income years. (2) Section 267 ‑ 30 in that Schedule has effect as if the income year mentioned in that section were the joining year, and not the * trial year. Note: Section 267 ‑ 30 in that Schedule requires the joining entity to pass the pattern of distributions test for the income year mentioned in that section if that entity distributed income or capital in that income year or within 2 months after the end of that income year. (3) Section 267 ‑ 35 in that Schedule has effect as if the reference in that section to an earlier income year were to an income year earlier than the joining year. (4) Disregard each distribution (if any) of income or capital (within the meaning of that Schedule) made by the joining entity after the joining time, so far as it was made from an amount of the entity’s income or capital attributable to a time after the joining time, in working out: (a) whether section 267 ‑ 30 in that Schedule requires the joining entity to pass the pattern of distributions test (as defined in that Schedule); and (b) whether the joining entity passes that test as required by section 267 ‑ 30 or 267 ‑ 35 in that Schedule. Note: Disregarding that percentage of a distribution may affect a test year distribution of income or a test year distribution of capital, as those terms are defined in section 269 ‑ 65 in that Schedule, and thus affect whether the joining entity passes the pattern of distributions test under section 269 ‑ 60 in that Schedule.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 143 of 2007, effective Schedule 1 (items 1, 4, 128–194, 222, 223, 225, 226), Schedule 2, Schedule 5 (items 1–16, 48(1)–(3)), Schedule 6 and Schedule 7 (items 18–68): Royal Assent Schedule 5 (items 31–46): 15 Mar 2007 (s 2(1) item 6) | 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 124 of 2013, effective Sch 1 (items 37–45), Sch 5 (items 7, 8(1)), Sch 7, Sch 8, Sch 10 (items 1–11, 13): 29 June 2013 (s 2(1) items 2, 10–12) Sch 2 (items 2–6, 21–42, 48): 11 July 2013 (s 2(1) item 3) Sch 2 (item 66): 11 July 2013 (s 2(1) item 5) Sch 10 (item 14): never commenced (s 2(1) item 13) Sch 11 (items 1–3): 3 Dec 2012 (s 2(1) item 15) Sch 11 (items 5, 6, 9): 28 June 2013 (s 2(1) item 16) Sch 11 (items 28, 32(1), 35–56): 30 June 2013 (s 2(1) items 18, 20, 22)

s 707-135 — Transferring loss transferred to joining entity because business continuity test was satisfied

(1) This section operates if the loss had been transferred to the joining entity (by a previous operation of this Subdivision) because the entity from which the loss was transferred carried on during a particular period: (a) the same business as it carried on at a particular time; or (b) if section 165 ‑ 211 applies in relation to the loss—a business similar to the business it carried on at a particular time. Note: Section 165 ‑ 211 enables an entity to satisfy the business continuity test by carrying on a similar business. (2) The loss is not transferred from the joining entity to the * head company of the joined group (despite section 707 ‑ 120), unless the joining entity satisfies the * business continuity test for: (a) the * trial year (the business continuity test period ); and (b) the time (the test time ) just before the end of the income year in which the loss was transferred to the joining entity.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | 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 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 7 of 2019, effective Sch 1 (items 1–13, 33–164): 1 Apr 2019 (s 2(1) item 1)

s 707-140 — Effect of transfer of loss

(1) To the extent that the loss is transferred under section 707 ‑ 120 from the joining entity to the * head company of the joined group, this Act operates (except so far as the contrary intention appears) for the purposes of income years ending after the transfer as if: (a) the head company had made the loss for the income year in which the transfer occurs; and (b) the joining entity had not made the loss for the income year for which the joining entity actually made the loss. (1A) However, subsection (1) does not affect the operation of paragraph 165 ‑ 211(1)(a) or (c). Note: This subsection ensures that the head company can only apply the version of the business continuity test in section 165 ‑ 211 if the loss of the joining entity was incurred on or after 1 July 2015. Head company may utilise loss for income year of transfer (2) The * head company is not prevented from * utilising the loss for the income year in which the transfer occurs merely because this Act operates as if the head company had made the loss (to the extent of the transfer) for that year. Debt forgiveness in income year for which loss is made (3) If a debt of the * head company of the joined group is * forgiven in the income year in which the transfer occurs, sections 245 ‑ 115 and 245 ‑ 130 operate as if the head company had made the loss for an earlier income year. Note: This subsection has the effect that the loss may be reduced in accordance with one of those subsections by applying the total net forgiven amount for the income year in which the transfer occurs.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 79 of 2010, effective Sch 1 (items 3–5, 27–32), Sch 2 (items 2–8, 17–45), Sch 3 (items 2–59), Sch 4 (items 2–6, 38–46, 51) and Sch 5 (items 2, 6–13): 1 July 2010 (s 2(1) items 2–4) | Amended by No 7 of 2019, effective Sch 1 (items 1–13, 33–164): 1 Apr 2019 (s 2(1) item 1)

s 707-145 — Cancelling the transfer of the loss

(1) The * head company of the joined group may choose to cancel the transfer of the loss. (2) If the * head company of the joined group does so, this Act (except this section) operates for all income years ending after the transfer as if it had not occurred under section 707 ‑ 120. (3) The choice cannot be revoked.

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

s 707-150 — Loss cannot be utilised for income year ending after the joining time

To the extent that the loss is not transferred under section 707 ‑ 120 from the joining entity to the * head company of the joined group, the loss cannot be * utilised by any entity for an income year ending after the joining time.

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

s 707-200 — What this Subdivision is about

This Subdivision modifies rules about a company maintaining the same ownership to be able to utilise a loss transferred to it under Subdivision 707 ‑ A, and specifies what things happening before the transfer are to be taken into account in working out whether the company can utilise the loss. Table of sections Operative provisions 707 ‑ 205 Modified period for test for maintaining same ownership 707 ‑ 210 Utilisation of certain losses transferred from a company depends on company that made the losses earlier

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

s 707-205 — Modified period for test for maintaining same ownership

(1) This section modifies Divisions 165, 166 and 167 for the purposes of working out whether a company can * utilise a loss of any * sort that it made because of a transfer under Subdivision 707 ‑ A. (2) Subdivision 165 ‑ A and Divisions 166 and 167 operate for those purposes as if the * loss year started at the time of the transfer. Note 1: This means that the ownership test period defined by subsection 165 ‑ 12(1) and the test period defined by subsection 166 ‑ 5(2) start at the time of the transfer. Note 2: Without this section, those periods would start at the start of the income year in which the transfer occurred, so events occurring before the transfer (such as changes in holdings of voting power, rights to dividends or rights to capital) could affect whether the company could utilise the tax loss or net capital loss.

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 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 130 of 2015, effective s 4, Sch 1 (items 1–3, 5–21) and Sch 3 (items 1–5): 16 Sept 2015 (s 2(1) items 1, 2, 4) Sch 2: 1 July 2015 (s 2(1) item 3) Sch 4 (items 1–52, 54–58): 17 Sept 2015 (s 2(1) item 5)

s 707-210 — Utilisation of certain losses transferred from a company depends on company that made the losses earlier

(1) This section has effect for the purposes of working out whether a company (the latest transferee ) can * utilise for an income year a loss it made because of a * COT transfer from a company (the latest transferor ). (1A) A transfer of a loss under Subdivision 707 ‑ A from a company to a company is a COT transfer of the loss if the transfer occurs because: (a) the transferor meets the conditions in section 165 ‑ 12; and (b) the conditions in one or more of paragraphs 165 ‑ 15(1)(a), (b) and (c) do not exist in relation to the transferor. Meeting conditions in section 165 ‑ 12 (2) The latest transferee is taken to meet the conditions in section 165 ‑ 12 for the income year in relation to the loss if and only if the company (the test company ) described in subsection (3) would have met those conditions for the income year had the circumstances described in subsection (4) existed. Note 1: The latest transferee and the test company may be the same company. Note 2: Section 707 ‑ 405 may affect the income year for which the test company is treated as having made the loss, if the loss is referable to part of an income year. (3) The test company is the first company to make the loss. However, if: (a) the loss was made by the latest transferor because of one or more earlier transfers of the loss under Subdivision 707 ‑ A from a company to a company; and (b) one or more of those earlier transfers was not a * COT transfer; the test company is the company to which the loss was transferred in the most recent transfer described in paragraph (b). (4) The circumstances are that: (a) the test company was not treated by Subdivision 707 ‑ A for the income year as not having made the loss; and (b) if the test company made the loss apart from that Subdivision and transferred the loss to itself under that Subdivision—the test company was not treated by that Subdivision for the income year as having made the loss for the income year in which the transfer occurred; and (c) nothing happened, after the time the loss was transferred from the test company to the * head company of a * consolidated group, to * membership interests or voting power: (i) in an entity that was at that time a * subsidiary member of the group; or (ii) in an entity that was at that time interposed between the test company and the head company; that would affect whether the test company would meet the conditions in section 165 ‑ 12 for the income year; and (d) if the loss has later been transferred under that Subdivision to the head company of another consolidated group—nothing happened, after the time of the later transfer, to membership interests or voting power: (i) in the later transferor; or (ii) in an entity that was at that time interposed between the later transferor and the head company; that would affect whether the test company would meet the conditions in section 165 ‑ 12 for the income year. Failing to meet conditions in section 165 ‑ 12 (5) The latest transferee is taken to fail to meet a condition in section 165 ‑ 12 only at: (a) the first time the test company would have failed to meet the condition had the circumstances described in subsection (4) existed; or (b) the test time described in subsection 166 ‑ 5(6) for the test company, if Division 166 is relevant to working out whether the test company could have * utilised the loss had the circumstances described in subsection (4) existed. Business continuity test applying to latest transferee under Division 166 (6) If subsection 166 ‑ 5(5) affects whether the latest transferee can * utilise the loss for the income year because the latest transferee is a * widely held company or an * eligible Division 166 company, or both, during the year, subsection 166 ‑ 5(6) operates as if it required the * business continuity test to be applied to the * business the latest transferee carried on just before the time described in subsection (5) of this section. If the test company made the loss because of a transfer (7) If the test company made the loss because of a transfer under Subdivision 707 ‑ A from another entity, Divisions 165 and 166 operate in relation to the test company for the purposes of subsection (2) as if the test company’s * loss year started at the time of the transfer.

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 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 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 7 of 2019, effective Sch 1 (items 1–13, 33–164): 1 Apr 2019 (s 2(1) item 1)

s 707-300 — What this Subdivision is about

Losses transferred to the head company of a consolidated group under Subdivision 707 ‑ A can be utilised for an income year only against a fraction of the income or gains remaining after the company has utilised other losses and deductions. Note: This Subdivision does not apply if the joining entity is a designated infrastructure project entity just before the transfer and the head company is a designated infrastructure project entity just after the transfer: see section 415 ‑ 45. Table of sections Object 707 ‑ 305 Object of this Subdivision How much of a transferred loss can be utilised? 707 ‑ 310 How much of a transferred loss can be utilised? 707 ‑ 315 What is a bundle of losses? 707 ‑ 320 What is the available fraction for a bundle of losses? 707 ‑ 325 Modified market value of an entity becoming a member of a consolidated group 707 ‑ 330 Losses transferred from former head company 707 ‑ 335 Limit on utilising transferred losses if circumstances change during income year 707 ‑ 340 Utilising transferred losses while exempt income remains 707 ‑ 345 Other provisions are subject to this Subdivision

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 124 of 2013, effective Sch 1 (items 37–45), Sch 5 (items 7, 8(1)), Sch 7, Sch 8, Sch 10 (items 1–11, 13): 29 June 2013 (s 2(1) items 2, 10–12) Sch 2 (items 2–6, 21–42, 48): 11 July 2013 (s 2(1) item 3) Sch 2 (item 66): 11 July 2013 (s 2(1) item 5) Sch 10 (item 14): never commenced (s 2(1) item 13) Sch 11 (items 1–3): 3 Dec 2012 (s 2(1) item 15) Sch 11 (items 5, 6, 9): 28 June 2013 (s 2(1) item 16) Sch 11 (items 28, 32(1), 35–56): 30 June 2013 (s 2(1) items 18, 20, 22)

s 707-305 — Object of this Subdivision

(1) The main object of this Subdivision is to limit, in a way that gives effect to the principles in subsections (2) and (3), the amount of losses transferred under Subdivision 707 ‑ A that can be * utilised for an income year by the transferee. (2) One principle is that the transferee is to * utilise the transferred losses for an income year only to the extent to which it has income or gains for the income year remaining after reduction by its other losses and deductions. (3) The other principle is that the amount of a transferred loss that the transferee can * utilise is to reflect the amount of the loss that the transferor could have * utilised for the income year if the transferor of the loss (whether the original maker of the loss or not) had not become a * member of a * consolidated group at the time of the transfer. (4) To give effect to those principles, this Subdivision operates on the assumption that, if each transferor of a loss to the transferee had not become a * member of a * consolidated group at the time of the transfer: (a) all the transferors of transferred losses to the transferee would have made income or gains for the year whose total did not exceed the transferee’s income or gains for the year remaining after reduction by its other losses and deductions; and (b) a particular transferor’s income or gains for the year would have equalled a fraction of the transferee’s income or gains for the year remaining after reduction by its other losses and deductions. (5) The fraction is worked out by reference to the transferor’s * market value at the time of the transfer (on the assumption that market value reflects capacity to generate income or gains in future).

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | 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 707-310 — How much of a transferred loss can be utilised?

(1) This section limits the amount of losses in a particular * bundle of losses transferred under Subdivision 707 ‑ A that can be * utilised by the transferee. The limit is set by reference to the * available fraction for the bundle. Note: Section 707 ‑ 335 of this Act and section 707 ‑ 350 of the Income Tax (Transitional Provisions) Act 1997 set different limits on utilising losses in a bundle of losses in certain circumstances. Basic rule (2) The transferee cannot * utilise more of the losses in the * bundle than the transferee would have been able to utilise (apart from this section) under the conditions in subsections (3), (4) and (5). (3) The first condition is that the only amount of the transferee’s * ordinary income, * statutory income or gains (if any) of a kind described in column 1 of an item of the table for the income year is the * available fraction of the amount worked out as described in column 2 of the item having regard to: (a) the transferee’s * ordinary income, * statutory income or gains for the income year apart from this section; and (b) the transferee’s deductions for the income year and losses, except losses transferred to the transferee under Subdivision 707 ‑ A. Income and gains Column 1 The transferee’s ordinary income, statutory income or gains of this kind: Column 2 Are worked out by reference to this amount: 1 * Capital gains The result of: (a) step 2 of the method statement in subsection 102 ‑ 5(1); or (b) step 3 of the method statement in section 165 ‑ 111; (as appropriate) for the transferee and the income year 3 * Exempt film income The transferee’s * net exempt film income for the income year remaining after deduction of the transferee’s * film losses (if any) 4 * Assessable film income The transferee’s * net assessable film income for the income year remaining after deduction of the transferee’s * film losses (if any) 5 * Exempt income other than * exempt film income The amount of the transferee’s * net exempt income for the income year that would have remained after deducting from it the transferee’s * tax losses (if any), assuming the amount of that income were what it would have been had the transferee not had * exempt film income for the year 6 Assessable income that is not attributable to * capital gains and is not * assessable film income The amount (if any) that would have been the transferee’s taxable income (if any) for the income year if the transferee had not had for the income year: (a) any * net capital gain; or (b) any * net assessable film income; reduced by the amount (the transferee’s grossed ‑ up franking offset amount ) worked out in accordance with paragraph (3A)(c) (3A) For the purposes of subsection (3): (a) the transferee’s * tax losses to which paragraph (b) of, or the table in, that subsection applies are to be worked out on the assumption that the transferee chooses to deduct under subsection 36 ‑ 17(2) all of the tax losses and that subsection 36 ‑ 17(5) does not apply to that choice; and (b) except as mentioned in paragraph (a) of this subsection, amounts worked out as described in column 2 of an item of the table in subsection (3) are to be worked out making the same choices as the transferee actually makes in working out its taxable income as stated in its * income tax return for the income year; and (c) the transferee’s grossed ‑ up franking offset amount mentioned in column 2 of item 6 in the table is the amount worked out using the formula: where: franking offsets means the total amount of * tax offsets to which the transferee is entitled for the income year under Division 207 and Subdivision 210 ‑ H (except those that are subject to the refundable tax offset rules because of section 67 ‑ 25). (4) The second condition is that once the amounts of the transferee’s income or gains have been worked out under subsection (3) they are not reduced by: (a) deductions, or losses, other than losses in the * bundle; or (b) taxes or expenses described in subsection 375 ‑ 805(4) (which is about * net exempt film income). Note: One of the effects of subsection (4) is that, for working out how much of a film loss in the bundle can be deducted from the transferee’s net exempt film income or net assessable film income: (a) the transferee’s net exempt film income will be the same as its exempt film income worked out under subsection (3); and (b) the transferee’s net assessable film income will be the same as its assessable film income worked out under subsection (3). (5) The third condition is that once the amounts of the transferee’s * exempt income have been worked out under subsection (3), assume that the transferee had no losses, outgoings or taxes described in subsection 36 ‑ 20(1) (which is about * net exempt income), in working out how much of a * tax loss in the * bundle can be deducted from the transferee’s net exempt income.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 142 of 2003, effective s 4, Sch 1 (items 1–15, 18–40), Sch 2 (items 1, 2, 4–29, 33–49, 52, 53), Sch 3, Sch 7 (items 1–23) and Sch 8 (items 4–17, 17A, 17B, 18–21, 24(2), (3)): 17 Dec 2003 (s 2(1) items 1–5, 10, 11, 13) | Amended by No 143 of 2007, effective Schedule 1 (items 1, 4, 128–194, 222, 223, 225, 226), Schedule 2, Schedule 5 (items 1–16, 48(1)–(3)), Schedule 6 and Schedule 7 (items 18–68): Royal Assent Schedule 5 (items 31–46): 15 Mar 2007 (s 2(1) item 6) | 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 2009, effective Schedule 1, Schedule 4 (items 11–34, 52) and Schedule 5 (items 7–13): Royal Assent Schedule 5 (items 2, 3, 14): 29 Jan 2009 Schedule 5 (items 5, 6): 1 July 2011 | 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)

s 707-315 — What is a bundle of losses?

(1) A bundle of losses comes into existence at the time (the initial transfer time ) a loss of any * sort that has not previously been transferred under Subdivision 707 ‑ A is transferred under that Subdivision from an entity (the real loss ‑ maker ) to the * head company of a * consolidated group (the joined group ). (2) At the initial transfer time, the bundle consists of every loss (regardless of its * sort) that: (a) is transferred at that time under that Subdivision from the real loss ‑ maker to the * head company of the joined group; and (b) has not been transferred under that Subdivision before that time. Note: For certain purposes, section 707 ‑ 327 of the Income Tax (Transitional Provisions) Act 1997 treats the bundle as including certain other losses too. (3) The bundle still exists at a later time if it includes at that later time at least one loss of any * sort that could be * utilised or otherwise reduced by an entity for an income year ending after that time (even if one or more losses have ceased to be included in the bundle before that later time). Note: A bundle continues to exist even if the losses in it are transferred again under Subdivision 707 ‑ A after the initial transfer time. (4) A loss ceases to be included in a * bundle at the first time for which it is true that the loss cannot be * utilised or otherwise reduced by any entity for an income year ending after that time. (5) If, had a loss been made by a company as assumed under a provision of Division 170, the loss would have been transferred under Subdivision 707 ‑ A, this Subdivision and other provisions that relate to or may affect the * available fractions for one or more * bundles of losses (including sections 707 ‑ 140 and 719 ‑ 325) operate as if the transfer had occurred. Note: Section 707 ‑ 140 provides for a choice to cancel a transfer under Subdivision 707 ‑ A. Section 719 ‑ 325 provides for a choice to cancel all losses in certain bundles of losses. A choice under one of those sections may result in a bundle not coming into existence, or not being in existence after a certain time. (6) To avoid doubt, a choice under section 707 ‑ 145 or 719 ‑ 325, as it operates because of subsection (5) of this section, relating to the loss does not affect or prevent: (a) a transfer of the loss that would have occurred under Subdivision 707 ‑ A as described in another application of that subsection involving a different company; or (b) * utilisation of the loss by the company that actually made the loss and is different from the company assumed under Division 170 to have made the loss. Note: Therefore a choice under section 707 ‑ 145 or 719 ‑ 325, as operating because of subsection (5) of this section, will be able to cause only one bundle not to exist, and will not affect the existence of other bundles that are treated as existing because of other operations of that subsection.

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)

s 707-320 — What is the available fraction for a bundle of losses?

(1) The available fraction for a * bundle of losses at a time is: where: transferee’s adjusted market value at the initial transfer time means the amount that would be the * market value, at the initial transfer time, of the transferee to which the losses in the * bundle were transferred at that time if: (a) the transferee did not have a loss of any * sort for an income year ending before that time; and (b) the balance of the transferee’s * franking account were nil at that time. Note: The value for the transferee will be worked out on the basis that subsidiary members of the consolidated group headed by the transferee are part of the transferee, because of section 701 ‑ 1 (the single entity rule). (2) However, if an event described in an item of the table happens, the available fraction for the * bundle is reduced or maintained just after the event by multiplying it by the factor identified in the item: Factors affecting the available fraction Item Event Factor 1 One or more losses in the * bundle are transferred for the second or subsequent time The lesser of 1 and this fraction: 2 At the same time as the losses in the * bundle were most recently transferred, losses in one or more other bundles were transferred from the same transferor to the same transferee, and the losses in the bundle or one of the other bundles had not been transferred before The result of dividing the lesser of: (a) the available fraction (apart from this subsection) for the bundle of losses that had not been transferred before; and (b) 1; by the sum of the available fractions for all the bundles (apart from this item applying to transfers at the time) 3 The company to which the losses in the * bundle were most recently transferred has transferred to it at a later time losses in one or more other bundles 4 There is an increase in the * market value of the company to which the losses in the * bundle were most recently transferred, because of an event described in subsection 707 ‑ 325(4) (but not covered by subsection 707 ‑ 325(5)) 5 The available fractions (apart from this item) for all the * bundles of losses most recently made by the company that most recently made the losses in the bundle total more than 1.000 (3) If the transfer under Subdivision 707 ‑ A of one or more losses in a * bundle causes events described in 2 or more items of the table in subsection (2) to happen and require calculations of the available fraction for that bundle and for one or more other bundles: (a) make the calculations required by those items in the order in which the items appear in the table; and (b) take account of the results of a calculation under an earlier item in making a calculation under a later item. (4) For a * bundle of losses: (a) subject to paragraph (b)—the available fraction is worked out to 3 decimal places, rounding up if the fourth decimal place is 5 or more; or (b) if the available fraction worked out under paragraph (a) is 0.000 and, if it were worked out to more decimal places, it would include one or more non ‑ zero digits—the available fraction is worked out to the number of decimal places that includes the first or only such digit, rounding up if the next decimal place is 5 or more. Examples: For 0.000328, the available fraction is 0.0003. For 0.000086, the available fraction is 0.00009. (4A) Subsections (1) and (2) have effect subject to subsection (4). (5) If, apart from this subsection, the available fraction for a * bundle of losses would need to be worked out by dividing a number by 0, work out the available fraction by dividing the number by 1. (6) The available fraction for a * bundle of losses is 0 if, apart from this subsection, it would be negative.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 13 of 2006, effective 29 Mar 2006 | 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 707-325 — Modified market value of an entity becoming a member of a consolidated group

Basic rule (1) The modified market value of an entity that becomes a * member of a * consolidated group at a particular time is the amount that would be the * market value of the entity at that time if: (a) the entity had no loss of any * sort for any income year, and the balance of its * franking account at that time were nil; and (b) the * subsidiary members of the group at that time were separate entities and not just parts of the * head company of the group; and (c) the entity’s market value did not include an amount attributable (directly or indirectly) to a * membership interest in a member of the group (other than the entity): (i) that is a * corporate tax entity; or (ii) that transferred a loss under Subdivision 707 ‑ A to the head company of the group at or before that time; and (d) the contribution to the entity’s market value made by a trust (other than one that is a member described in paragraph (c)) were limited to the amount attributable to the entity’s * fixed entitlements (if any) at that time to income or capital of the trust that is not attributable (directly or indirectly) to a membership interest in such a member. Note 1: Section 707 ‑ 330 affects the modified market value of an entity that becomes a subsidiary member of the consolidated group, if the entity was the head company of another consolidated group just beforehand. Note 2: Section 707 ‑ 325 of the Income Tax (Transitional Provisions) Act 1997 provides for an entity’s modified market value to be increased in certain circumstances for the purposes of working out the available fraction for a bundle of losses transferred from the entity. Rule to prevent inflation of modified market value (2) However, if: (a) one or more of the events described in subsection (4) occurred in the 4 years before the time; and (b) the amount worked out under subsection (1) exceeds what it would have been if none of those events had occurred; the modified market value of the entity at the time is the amount worked out under subsection (1), reduced by the amount worked out under subsection (3). (3) The amount of the reduction is the lesser of: (a) the excess described in paragraph (2)(b); and (b) the total increase in the * market value of the entity that occurred immediately after each event mentioned in paragraph (2)(a) because of the event. (4) These are the events: (a) an injection of capital into the entity or an entity that was an * associate of the entity (or of the trustee of the entity, if the entity is a trust) at the time of the injection; (b) a transaction that: (i) did not take place at * arm’s length; and (ii) involved the entity or an entity that was an associate of the entity (or of the trustee of the entity, if the entity is a trust) at the time of the transaction. (5) For the purposes of paragraph (2)(a), disregard an injection of capital if, and only if, it is made: (a) into a * listed public company through a * dividend reinvestment * scheme involving the issue of a * share in the company to an entity that held a share in the company before the injection; or (b) in association with the acquisition of a * share in a company in relation to which the conditions in subsection 703 ‑ 35(5) are met; or (c) in association with the acquisition of a * share, in a body corporate, in relation to which the conditions in subsection 703 ‑ 37(4) are met. Note 1: Section 703 ‑ 35 of this Act deals with shares acquired under arrangements for employee shareholdings. Note 2: Section 703 ‑ 37 of this Act deals with certain preference shares following an ADI restructure.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | 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 117 of 2007, effective 28 June 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 | Amended by No 88 of 2013, effective s 4, Sch 1 (items 1–18), Sch 3 and Sch 7 (items 200–210, 236–242): 28 June 2013 (s 2(1) items 1, 2, 5, 21, 26) Sch 1 (items 33, 34): 1 July 2013 (s 2(1) item 3) Sch 5 (items 1–5, 7–9) and Sch 6 (items 3–41, 50–65): 29 June 2013 (s 2(1) items 8, 9, 14) Sch 7 (items 1–4): 1 July 2012 (s 2(1) item 15)

s 707-330 — Losses transferred from former head company

(1) This section has effect for working out the * available fraction for a * bundle of losses if: (a) an entity (the ex ‑ head company ) becomes a * subsidiary member of a * consolidated group (the bigger group ) at a time (the joining time ); and (b) just before the joining time the ex ‑ head company was the * head company of another consolidated group (the old group ); and (c) at the joining time the losses are transferred under Subdivision 707 ‑ A from the ex ‑ head company to the head company of the bigger group. (2) Work out the ex ‑ head company’s * modified market value or * market value as if each * member of the bigger group that had been a * subsidiary member of the old group just before the joining time were a part of the ex ‑ head company, and not a separate member of the bigger group, when the transfer occurred. (3) Also, work out the ex ‑ head company’s * modified market value as if each * subsidiary member of the old group had been a part of the ex ‑ head company while it was a subsidiary member of the old group.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | 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 707-335 — Limit on utilising transferred losses if circumstances change during income year

(1) This section limits the amount of losses in a particular * bundle of losses transferred under Subdivision 707 ‑ A that can be * utilised by the transferee for an income year if: (a) the losses in the bundle are transferred to the transferee after the start of the income year; or (b) the value of the * available fraction for the bundle changes at a time within the period (the transferee’s loss ‑ holding period ) described in subsection (2). (2) The transferee’s loss ‑ holding period: (a) starts at the start of the income year or, if the losses in the * bundle were transferred to the transferee from another entity during the income year, at the time of the transfer; and (b) ends when one of these events occurs: (i) the income year ends; (ii) the transferee becomes a * subsidiary member of a * consolidated group. (3) The transferee cannot * utilise for the income year more of the losses than is reasonable having regard to: (a) the method in section 707 ‑ 310 for working out the maximum amount of the losses the transferee could utilise for the income year (apart from this section); and (b) the number of days in the transferee’s loss ‑ holding period; and (c) the value or values of the * available fraction for the * bundle during the transferee’s loss ‑ holding period; and (d) the number of days in the transferee’s loss ‑ holding period for which the available fraction for the bundle has a particular value; and (e) the principle that, if the transferee transferred the losses to itself under Subdivision 707 ‑ A after the start of the income year, the amount of the losses it can utilise for the income year should be worked out as if: (i) the losses had been included in the bundle from the start of the income year; and (ii) the available fraction for the bundle had been 1 from the start of the income year until the time of the transfer; and (f) any other relevant matters. (4) Section 707 ‑ 310 has effect subject to this section.

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)

s 707-340 — Utilising transferred losses while exempt income remains

Transferred film losses and net exempt film income (1) If: (a) the transferee of * film losses in a * bundle of losses has deducted from its * net exempt film income for an income year an amount of those losses that: (i) is equal to the amount of * exempt film income worked out under subsection 707 ‑ 310(3) for the transferee and the bundle; or (ii) if section 707 ‑ 335 affects the transferee’s utilisation of losses in the bundle—is reasonable, having regard to that section; and (b) the transferee still has net exempt film income for the year and film losses remaining in the bundle; the fact the transferee still has net exempt film income does not stop it deducting film losses remaining in the bundle from its * net assessable film income for the year. Transferred tax losses and net exempt income (2) If: (a) the transferee of * tax losses (other than * film losses) in a * bundle of losses has deducted from its * net exempt income for an income year an amount of its tax losses (other than film losses) in the bundle that: (i) is equal to the amount of * exempt income worked out under subsection 707 ‑ 310(3) for the transferee and the bundle; or (ii) if section 707 ‑ 335 affects the transferee’s utilisation of losses in the bundle—is reasonable, having regard to that section; and (b) the transferee still has net exempt income for the year and tax losses (other than film losses) remaining in the bundle; the fact the transferee still has net exempt income does not stop it deducting tax losses (other than film losses) remaining in the bundle from its assessable income for the year. Limit on deduction (3) This section does not allow the deduction for an income year of an amount of losses in a * bundle so as to exceed the limit set by section 707 ‑ 310 or 707 ‑ 335 on * utilisation for the year of losses of that * sort in the bundle.

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

s 707-345 — Other provisions are subject to this Subdivision

The rules in this Subdivision are additional to the provisions of this Act about * utilising losses that are outside this Subdivision. Those provisions have effect subject to this Subdivision.

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

s 707-400 — Head company’s business before and after consolidation not compared

(1) If: (a) the * business continuity test applies to a company that becomes a * head company of a * consolidated group at a time; and (b) apart from this section, the business continuity test period would start before that time and end after it; the business continuity test period starts at that time (and ends when it would end apart from this section), for the purposes of that application of the business continuity test. (2) Subsection (1) does not apply for the purposes of working out whether the company can transfer to itself a loss under section 707 ‑ 120.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 7 of 2019, effective Sch 1 (items 1–13, 33–164): 1 Apr 2019 (s 2(1) item 1)

s 707-410 — Exit history rule does not treat entity as having made a loss

(1) To avoid doubt, if the * head company of a * consolidated group makes a loss of a particular * sort and an entity ceases to be a * subsidiary member of the group, the entity is not taken because of section 701 ‑ 40 (the exit history rule): (a) to have made the loss; or (b) to have made another loss of the same sort because of the circumstances that caused the head company to make the loss. (2) It does not matter whether the * head company makes the loss because of a transfer under Subdivision 707 ‑ A (whether from the entity or another entity) or because of another provision.

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)

s 707-415 — Application of losses with nil available fraction for certain purposes

(1) Subsection (2) applies if: (a) an entity (the joining entity ) becomes a * member of a * consolidated group at a time (the joining time ); and (b) a * tax loss or a * net capital loss was transferred from the joining entity to the * head company of the group at the joining time under Subdivision 707 ‑ A; and (c) that loss is included in a * bundle of losses for which the * available fraction is 0. (2) The * head company can choose to apply the loss as shown in the table: Item If ... the head company can choose to apply the loss in reduction of ... for the purposes of ... 1 (a) the joining entity owed a debt just before the joining time to an entity that was not a * member of the group at the joining time; and (b) the loss is wholly or partly attributable to the debt; and (c) Subdivision 245 ‑ E (about applying the total net forgiven amount to reduce other amounts) applies in relation to the debt (or another debt that is reasonably connected to the debt) because the debt is * forgiven after the joining time the * total net forgiven amount applying that total net forgiven amount in accordance with sections 245 ‑ 115, 245 ‑ 130, 245 ‑ 145 and 245 ‑ 175 2 (a) the joining entity owed a * limited recourse debt just before the joining time to an entity that was not a * member of the group at the joining time; and (b) Division 243 applies in relation to the debt; and (c) the loss is wholly or partly attributable to a deduction mentioned in paragraph 243 ‑ 15(1)(c) for an income year ending before the joining time the deduction working out the excess referred to in subsection 243 ‑ 35(1). 3 (a) the joining entity ceases to be a * subsidiary member of the group at a time (the leaving time ) after the joining time; and (b) the entity’s liabilities at the leaving time are the same as, or are reasonably connected to, the liabilities that it had at the joining time the amount remaining mentioned in paragraph 104 ‑ 520(1)(b) working out whether * CGT event L5 happens at the leaving time, and if so, the amount of any * capital gain under subsection 104 ‑ 520(3). Limits on application of loss (3) The loss can be applied under subsection (2) in relation to an income year only to the extent that it could be * utilised by the * head company for the income year, on the assumption that the * available fraction for the * bundle of losses was 1. (4) The amount of the loss that may be applied in accordance with item 1 of the table in subsection (2) cannot exceed the * gross forgiven amount of the debt to which the loss is attributable. (5) The amount of the loss that may be applied in accordance with item 2 of the table in subsection (2) cannot exceed the amount of the loss that is attributable to the deduction mentioned in that item. (6) For the purposes of item 3 of the table in subsection (2), if: (a) assuming that the joining entity ceased to be a * subsidiary member of the * consolidated group just after the joining time, the * head company of the group would make a * capital gain because of * CGT event L5; and (b) the sum of the losses in the * bundle of losses mentioned in paragraph (1)(c) exceeds the amount of the capital gain; the total amount of those losses that may be applied in accordance with that item cannot exceed the amount of the capital gain. (7) To avoid doubt, a loss can be applied under this section only to the extent that it has not already been applied.

Amendment history: Inserted by No 88 of 2009, effective s. 4, Schedule 3 (items 1, 5–23), Schedule 4 (items 2–5) and Schedule 5 (items 113–204, 237, 238, 258, 282, 319–341, 344): 18 Sept 2009 Schedule 2 (items 4–15, 25–27, 30, 31): 1 Oct 2009 Schedule 2 (item 23): 1 Jan 2010 | Amended by No 79 of 2010, effective Sch 1 (items 3–5, 27–32), Sch 2 (items 2–8, 17–45), Sch 3 (items 2–59), Sch 4 (items 2–6, 38–46, 51) and Sch 5 (items 2, 6–13): 1 July 2010 (s 2(1) items 2–4)

s 709-50 — What this Subdivision is about

Only the head company of a consolidated group has an operating franking account. The subsidiary members’ franking accounts do not operate while they are subsidiary members. Debits or credits that would otherwise arise in subsidiary members’ franking accounts arise instead in the head company’s franking account. Table of sections Object 709 ‑ 55 Object of this Subdivision Treatment of franking accounts at joining time 709 ‑ 60 Nil balance franking account for joining entity Treatment of subsidiary member’s franking account 709 ‑ 65 Subsidiary member’s franking account does not operate Treatment of head company’s franking account 709 ‑ 70 Credits arising in head company’s franking account 709 ‑ 75 Debits arising in head company’s franking account Franking distributions by subsidiary member 709 ‑ 80 Subsidiary member’s distributions on employee shares and certain preference shares taken to be distributions by the head company 709 ‑ 85 Non ‑ share distributions by subsidiary members taken to be distributions by head company 709 ‑ 90 Subsidiary member’s distributions to foreign resident taken to be distributions by head company Payment of group liability by former subsidiary member 709 ‑ 95 Payment of group liability by former subsidiary member 709 ‑ 100 Refund of income tax to former subsidiary member

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

s 709-55 — Object of this Subdivision

The object of this Subdivision is for each * consolidated group to operate what is in substance a single * franking account, by ensuring that: (a) there is a nil balance in the franking accounts of entities becoming * subsidiary members of the group; and (b) the franking accounts of those subsidiary members do not operate while they are subsidiary members; and (c) debits or credits that would otherwise arise in the franking accounts of the subsidiary members arise instead in the franking account of the * head company of the group; and (d) the head company is the only * member of the group that can frank distributions.

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

s 709-60 — Nil balance franking account for joining entity

(1) This section operates if an entity (the joining entity ) becomes a * subsidiary member of a * consolidated group at a time (the joining time ). (2) If the joining entity’s * franking account is in surplus just before the joining time: (a) a debit equal to the * franking surplus arises at the joining time in the joining entity’s franking account; and (b) a credit equal to the franking surplus arises at the joining time in the franking account of the * head company of the group. (3) If the joining entity’s * franking account is in deficit just before the joining time: (a) a credit equal to the * franking deficit arises at the joining time in the joining entity’s franking account; and (b) the joining entity is liable to pay * franking deficit tax as if the joining entity’s income year had ended just before the joining time; and (c) despite item 5 of the table in section 205 ‑ 15, a credit does not arise under that item in the joining entity’s franking account because of that liability.

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 709-65 — Subsidiary member’s franking account does not operate

The * franking account of an entity that is a * subsidiary member of a * consolidated group does not operate during the period: (a) beginning just after the entity becomes a subsidiary member of the group; and (b) ending when the entity ceases to be a subsidiary member of the group.

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

s 709-70 — Credits arising in head company’s franking account

(1) This section operates if a credit would arise in the * franking account of a * subsidiary member of a * consolidated group at a time (the crediting time ) apart from section 709 ‑ 65. (2) A credit arises in the * franking account of the * head company of the group at the crediting time. Note: A credit can also arise in the head company’s franking account at any time under section 205 ‑ 15. (3) The amount of the credit is the same as the amount of the credit that would arise in the * franking account of the * subsidiary member. (4) This section does not apply to a credit arising in the * subsidiary member’s * franking account under paragraph 709 ‑ 60(3)(a). Note: Such a credit arises if the entity that became the subsidiary member had a deficit in its franking account just before the time it became the subsidiary member. The credit equals the deficit, creating a nil balance in the account from that 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)

s 709-75 — Debits arising in head company’s franking account

(1) This section operates if a debit would arise in the * franking account of a * subsidiary member of a * consolidated group at a time (the debiting time ) apart from section 709 ‑ 65. (2) A debit arises in the * franking account of the * head company of the group at the debiting time. Note: A debit can also arise in the head company’s franking account at any time under section 205 ‑ 30. (3) The amount of the debit is the same as the amount of the debit that would arise in the * franking account of the * subsidiary member. (4) This section does not apply to a debit arising in the * subsidiary member’s * franking account under paragraph 709 ‑ 60(2)(a). Note: Such a debit arises if the entity that became the subsidiary member had a surplus in its franking account just before the time it became the subsidiary member. The debit equals the surplus, creating a nil balance in the account from that 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)

s 709-80 — Subsidiary member’s distributions on employee shares and certain preference shares taken to be distributions by the head company

(1) This section operates if: (a) a * subsidiary member of a * consolidated group makes a * frankable distribution; and (b) the distribution is made because an entity (the shareholder ) owns a * share in the subsidiary member; and (c) the share must be disregarded under subsection 703 ‑ 35(4) or 703 ‑ 37(4); and (d) the distribution is made to the shareholder, or to another entity because the shareholder owns the share; and (e) the entity to which the distribution is made is not a * member of the group. Note 1: Subsection 703 ‑ 35(4) requires certain shares acquired under employee share schemes to be disregarded. Note 2: Subsection 703 ‑ 37(4) requires certain preference shares to be disregarded following an ADI restructure. (2) Part 3 ‑ 6 operates as if the * distribution were a * frankable distribution made by the * head company of the group to a * member of the head company. Note: Part 3 ‑ 6 deals with imputation.

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 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 709-85 — Non ‑ share distributions by subsidiary members taken to be distributions by head company

(1) This section operates if: (a) an entity holds a * non ‑ share equity interest in a * subsidiary member of a * consolidated group; and (b) the subsidiary member makes a * non ‑ share distribution to the entity as holder of the interest; and (c) the distribution is a * frankable distribution; and (d) the entity to which the distribution is made is not a * member of the group. (2) Part 3 ‑ 6 operates as if the * distribution were a * frankable distribution made by the * head company of the group to a * member of the head company. Note: Part 3 ‑ 6 deals with imputation.

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

s 709-90 — Subsidiary member’s distributions to foreign resident taken to be distributions by head company

Part 3 ‑ 6 operates as if a * frankable distribution made by a * subsidiary member of a * consolidated group (the foreign ‑ held subsidiary ) were a frankable distribution made by the * head company of the group to a * member of the head company if: (a) the foreign ‑ held subsidiary meets 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; and (b) the frankable distribution is made to a foreign resident. Note: Part 3 ‑ 6 deals with imputation.

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 709-95 — Payment of group liability by former subsidiary member

(1) This section operates if: (a) an entity (the former subsidiary ) ceases to be a * subsidiary member of a * consolidated group (the old group ) at a particular time (the leaving time ); and (b) at or after the leaving time, the former subsidiary: (i) * pays a PAYG instalment for which it was jointly and severally liable under subsection 721 ‑ 15(1) because it was a subsidiary member of the old group; or (ii) * pays income tax for which it was jointly and severally liable under that subsection because it was a subsidiary member of the old group; and (c) apart from this section, a * franking credit would arise under section 205 ‑ 15 in the * franking account of the former subsidiary at a time (the crediting time ) because of that payment. (2) The credit: (a) does not arise at the crediting time in the * franking account of the former subsidiary; and (b) instead, arises at the crediting time in the franking account of the entity that was the * head company of the old group at the leaving 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 709-100 — Refund of income tax to former subsidiary member

(1) This section operates if: (a) an entity (the former subsidiary ) ceases to be a * subsidiary member of a * consolidated group (the old group ) at a particular time (the leaving time ); and (b) at or after the leaving time, the former subsidiary * receives a refund of income tax or * receives a refund of diverted profits tax, for which it was jointly and severally liable under subsection 721 ‑ 15(1) because it was a subsidiary member of the old group; and (c) apart from this section, a * franking debit would arise under section 205 ‑ 30 in the * franking account of the former subsidiary at a time (the debiting time ) because of that payment. (2) The debit: (a) does not arise at the debiting time in the * franking account of the former subsidiary; and (b) instead, arises at the debiting time in the franking account of the entity that was the * head company of the old group at the leaving 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) | Amended by No 27 of 2017, effective Sch 1 (items 14–43, 52) and Sch 3: 1 July 2017 (s 2(1) items 4, 5)

s 709-150 — What this Subdivision is about

This Subdivision modifies the way Division 208 (exempting entities and former exempting entities) operates in relation to consolidated groups. Table of sections Operative provisions 709 ‑ 155 Testing consolidated groups 709 ‑ 160 Subsidiary member is exempting entity 709 ‑ 165 Subsidiary member is former exempting entity 709 ‑ 170 Head company and subsidiary are exempting entities 709 ‑ 175 Head company is former exempting entity

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 709-155 — Testing consolidated groups

(1) To determine whether a * consolidated group is an * exempting entity or * former exempting entity, the tests in Division 208 are applied to the * head company of the group. (2) However, there are some additional rules that can alter the way that Division 208 applies to a * consolidated group. These are set out in sections 709 ‑ 160 to 709 ‑ 175. (3) In applying those rules to an entity that is a * member of a * consolidated group: (a) Division 208 is to be applied before those rules; and (b) that Division is to be applied just after the entity became a member of the group but, for a * subsidiary member, it is to be applied on the assumption that the subsidiary was not a member of the group at that time. (4) Except as mentioned in paragraph (3)(b), Division 208 has no application to a * subsidiary member of a * consolidated group.

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 709-160 — Subsidiary member is exempting entity

(1) This section operates if: (a) the * head company of a * consolidated group is neither an exempting entity nor a * former exempting entity; and (b) a * corporate tax entity becomes a * subsidiary member of the group at a time (the joining time ); and (c) the entity is an * exempting entity at the joining time. (2) These rules apply to the * consolidated group. Rules applying to * consolidated group Item Rule 1 The * head company becomes a * former exempting entity at the joining time 2 The * head company has both a * franking account and an * exempting account 3 If the * subsidiary member’s * franking account has a * franking surplus at the joining time: (a) a debit equal to that surplus arises in that account at the joining time; and (b) a credit equal to that surplus arises in the * exempting account of the * head company at the joining time 4 Subsection 709 ‑ 60(2) (about franking surplus) does not apply to the * subsidiary member 5 Item 1 of the table in section 208 ‑ 115 does not apply to the * head company 6 Item 1 of the table in section 208 ‑ 120 does not apply to the * head company 7 Item 1 of the table in section 208 ‑ 130 does not apply to the * head company 8 Item 1 of the table in section 208 ‑ 145 does not apply to the * head company Note 1: If the subsidiary’s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709 ‑ 60(3). Note 2: The subsidiary’s franking account does not operate while it is a member of the group: see section 709 ‑ 65.

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 709-165 — Subsidiary member is former exempting entity

(1) This section operates if: (a) the * head company of a * consolidated group is neither an exempting entity nor a * former exempting entity; and (b) a * corporate tax entity becomes a * subsidiary member of the group at a time (also the joining time ); and (c) the entity is a * former exempting entity at the joining time. (2) These rules apply to the * consolidated group. Rules applying to * consolidated group Item Rule 1 The * head company becomes a * former exempting entity at the joining time 2 The * head company has both a * franking account and an * exempting account 3 If the * subsidiary member’s * exempting account has an * exempting surplus at the joining time: (a) a debit equal to that surplus arises in that account at the joining time; and (b) a credit equal to that surplus arises in the exempting account of the * head company at the joining time 4 If the * subsidiary member’s * exempting account has an * exempting deficit at the joining time: (a) a credit equal to that deficit arises in that account at the joining time; and (b) a debit equal to that deficit arises in the subsidiary’s * franking account just before the joining time 5 The * subsidiary member’s * exempting account does not operate during the period: (a) starting just after the joining time; and (b) ending when the entity ceases to be a subsidiary member of the group 6 Item 1 of the table in section 208 ‑ 115 does not apply to the * head company 7 Item 1 of the table in section 208 ‑ 120 does not apply to the * head company 8 Item 1 of the table in section 208 ‑ 130 does not apply to the * head company 9 Item 1 of the table in section 208 ‑ 145 does not apply to the * head company Note 1: Any surplus in the subsidiary’s franking account will be transferred to the head company’s franking account: see subsection 709 ‑ 60(2). Note 2: If the subsidiary’s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709 ‑ 60(3). This deficit may be increased by item 4 in the table in subsection (2). Note 3: The subsidiary’s franking account does not operate while it is a member of the group: see section 709 ‑ 65.

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 709-170 — Head company and subsidiary are exempting entities

There is no change to the status of the * head company of a * consolidated group if: (a) the head company is an * exempting entity; and (b) a * corporate tax entity becomes a * subsidiary member of the group at a time (also the joining time ); and (c) the entity is an exempting entity at the joining time. Note 1: If the subsidiary’s franking account is in surplus, that surplus will be transferred to the head company’s franking account: see subsection 709 ‑ 60(2). Note 2: If the subsidiary’s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709 ‑ 60(3). Note 3: The subsidiary’s franking account does not operate while it is a member of the group: see section 709 ‑ 65.

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 709-175 — Head company is former exempting entity

(1) Subsection (2) operates if: (a) the * head company of a * consolidated group is a * former exempting entity; and (b) a * corporate tax entity becomes a * subsidiary member of the group at a time (also the joining time ); and (c) the entity is an * exempting entity at the joining time. (2) These rules apply to the * consolidated group. Rules applying to * consolidated group Item Rule 1 There is no change to the status of the * head company 2 If the subsidiary member’s * franking account has a * franking surplus at the joining time: (a) a debit equal to that surplus arises in that account at the joining time; and (b) a credit equal to that surplus arises in the * exempting account of the * head company at the joining time 3 Subsection 709 ‑ 60(2) (about franking surplus) does not apply to the * subsidiary member Note 1: If the subsidiary’s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709 ‑ 60(3). Note 2: The subsidiary’s franking account does not operate while it is a member of the group: see section 709 ‑ 65. (3) Subsection (4) operates if: (a) the * head company of a * consolidated group is a * former exempting entity; and (b) a * corporate tax entity becomes a * subsidiary member of the group at a time (also the joining time ); and (c) the entity is a * former exempting entity at the joining time. (4) These rules apply to the * consolidated group. Rules applying to * consolidated group Item Rule 1 There is no change to the status of the * head company 2 If the * subsidiary member’s * exempting account has an * exempting surplus at the joining time: (a) a debit equal to that surplus arises in that account at the joining time; and (b) a credit equal to that surplus arises in the exempting account of the * head company at the joining time 3 If the * subsidiary member’s * exempting account has an * exempting deficit at the joining time: (a) a credit equal to that deficit arises in that account at the joining time; and (b) a debit equal to that deficit arises in the subsidiary’s * franking account just before the joining time 4 The * subsidiary member’s * exempting account does not operate during the period: (a) starting just after the joining time; and (b) ending when the entity ceases to be a subsidiary member of the group Note 1: If the subsidiary’s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709 ‑ 60(3). This deficit may be increased by item 3 in the table in subsection (4). Note 2: The subsidiary’s franking account does not operate while it is a member of the group: see section 709 ‑ 65. (5) There is no change to the status of the * head company of a * consolidated group if: (a) the head company is a * former exempting entity; and (b) a * corporate tax entity becomes a * subsidiary member of the group; and (c) the entity is neither an * exempting entity nor a former exempting entity at the joining time. Note 1: If the subsidiary’s franking account is in surplus, that surplus will be transferred to the head company’s franking account: see subsection 709 ‑ 60(2). Note 2: If the subsidiary’s franking account is in deficit, it will be liable for franking deficit tax: see subsection 709 ‑ 60(3). Note 3: The subsidiary’s franking account does not operate while it is a member of the group: see section 709 ‑ 65.

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 709-180 — What this Subdivision is about

This Subdivision provides that any excess in the tax offset arising from a franking deficit tax liability of an entity that becomes a subsidiary member of a consolidated group is transferred to the head company of the group. Table of sections 709 ‑ 185 Joining entity’s excess franking deficit tax offsets transferred to head company 709 ‑ 190 Exit history rule not to treat leaving entity as having a franking deficit tax offset excess

Amendment history: Inserted 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 709-185 — Joining entity’s excess franking deficit tax offsets transferred to head company

(1) This section operates if: (a) an entity (the joining entity ) becomes a * subsidiary member of a * consolidated group at a time (the joining time ); and (b) the joining entity is entitled to a * tax offset under section 205 ‑ 70 for the income year that ends or, if subsection 701 ‑ 30(3) applies, that is taken by subsection (3) of that section to end, at the joining time; and (c) an amount (the joining entity’s excess ) of the offset remains after applying section 63 ‑ 10 (about the tax offset priority rules) to the joining entity’s basic income tax liability for that income year. Transfer of excess to head company (2) For the purpose of applying subsection 205 ‑ 70(1) to the * head company of the * consolidated group for the income year in which the joining time occurs: (a) if, as described in paragraph 205 ‑ 70(1)(c), an amount of a * tax offset remains after applying section 63 ‑ 10—that amount is taken to be increased by the amount of the joining entity’s excess; or (b) otherwise: (i) paragraph 205 ‑ 70(1)(c) is taken to apply to the head company; and (ii) the remaining amount of a tax offset covered by that paragraph is taken to be the amount of the joining entity’s excess. Note: Paragraph 205 ‑ 70(1)(c) refers to tax offsets under section 205 ‑ 70. (2A) In working out whether paragraph (2)(a) applies, take into account any application of this section to any other entity that became a * subsidiary member of the group before the joining time. Joining entity prevented from utilising excess in later income years (3) For the purpose of applying subsection 205 ‑ 70(1) to the joining entity for any income year after that in which the joining time occurs, the joining entity’s excess is disregarded.

Amendment history: Inserted 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 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 709-190 — Exit history rule not to treat leaving entity as having a franking deficit tax offset excess

To avoid doubt, if: (a) the * head company of a * consolidated group is entitled to a * tax offset under section 205 ‑ 70 for an income year; and (b) an amount (the excess ) of the offset remains after applying section 63 ‑ 10 (about the tax offset priority rules) to the head company’s basic income tax liability for that income year; and (c) an entity ceases to be a * subsidiary member of the group in the income year; the entity is not taken because of section 701 ‑ 40 (the exit history rule): (d) to have the excess; or (e) to have another excess of that kind because of the circumstances that caused the head company to have the excess.

Amendment history: Inserted 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 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7)

s 709-200 — What this Subdivision is about

An entity can deduct a bad debt that: (a) has for a period been owed to a member of a consolidated group; and (b) has for another period been owed to an entity that was not a member of that group; only if each entity that has been owed the debt for such a period could have deducted the debt had it been written off as bad at the end of the period. This applies even if the debt is owed to the same entity for different periods. Table of sections Application and object 709 ‑ 205 Application of this Subdivision 709 ‑ 210 Object of this Subdivision Limit on deduction of bad debt 709 ‑ 215 Limit on deduction of bad debt Extension of Subdivision to debt/equity swap loss 709 ‑ 220 Limit on deduction of swap loss

Amendment history: Inserted 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)

s 709-205 — Application of this Subdivision

(1) This Subdivision affects whether an entity (the claimant ) that is or has been a * member of a * consolidated group and writes off a debt, or part of a debt, as bad may deduct the debt or part if the conditions in subsection (2) exist. Note: This Subdivision affects similarly whether an entity that is or has been a member of a consolidated group and extinguishes a debt as part of a debt/equity swap may deduct a loss resulting from the swap. See section 709 ‑ 220. (2) The conditions are that, in the time starting when the debt was incurred (whether to the claimant or another entity) and ending when the claimant wrote off the debt or part: (a) the debt was owed to an entity (whether the claimant or another entity) for a period (a debt test period ) when the entity was a * member of a * consolidated group; and (b) the debt was owed to an entity (whether the claimant or another entity) for a period (also a debt test period ) when the entity was a not a member of that group. Note 1: The debt must have been owed to the claimant for at least one of the debt test periods for the claimant to have been able to write it off. Note 2: One effect of section 701 ‑ 1 (Single entity rule) is that a debt is taken to be owed to the head company of a consolidated group while the debt is owed to a subsidiary member of the group. (3) Ignore section 701 ‑ 5 (Entry history rule) and section 701 ‑ 40 (Exit history rule) in identifying a debt test period. Note: Subsection (3) does not affect sections 701 ‑ 5 and 701 ‑ 40 so far as they operate to treat the debt, or part of the debt, as having been included in the claimant’s assessable income. That inclusion is generally a condition under section 25 ‑ 35 for the claimant to be able to deduct the debt. (4) This Subdivision does not apply in relation to a debt merely because it is assigned: (a) from an entity that is a * member of a * consolidated group to an entity that is not a member of that group; or (b) from an entity that is not a member of a consolidated group to an entity that is a member of a consolidated group; or (c) from an entity that is a member of a consolidated group to an entity that is a member of another consolidated group. This subsection has effect despite subsections (1) and (2). Note: There is not an assignment of a debt from one entity to another merely because section 701 ‑ 1 (Single entity rule) starts or ceases to apply in relation to the entities so that the debt ceases to be a debt owed to one entity and becomes a debt owed to the other entity.

Amendment history: Inserted 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 162 of 2005, effective Schedule 2 (items 1–13), Schedule 3 (items 1–3, 16–19, 33) and Schedule 6 (items 28–32): Royal Assent Schedule 6 (items 1–5, 7–13): 1 July 2005 Sch 6 (items 6, 16–25): 1 July 2001 (s 2(1) items 4, 6)

s 709-210 — Object of this Subdivision

The main object of this Subdivision is to ensure that the claimant can deduct the debt, or part of it, only if each entity that was owed the debt for a debt test period could have deducted the debt if it had been written off as bad at the end of the period.

Amendment history: Inserted 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)

s 709-215 — Limit on deduction of bad debt

(1) The claimant can deduct the debt, or part of the debt, if, and only if: (a) section 8 ‑ 1 or 25 ‑ 35 permits the deduction (ignoring subsection 25 ‑ 35(5) and the provisions mentioned in that subsection); and (b) the condition in subsection (2) is met for each debt test period. (2) The condition is that the entity that was owed the debt for the debt test period could have deducted the debt for an income year (the debt test income year ) starting and ending at the times identified in subsection (3) if: (a) the entity had written off the debt as bad at the end of the period; and (b) these provisions (the modified provisions ) had effect as described in this section: (i) sections 165 ‑ 123 and 165 ‑ 126 (which are about conditions that must be met for a company to be able to deduct a bad debt); (ii) sections 266 ‑ 35, 266 ‑ 85, 266 ‑ 120, 266 ‑ 160 and 267 ‑ 25 in Schedule 2F to the Income Tax Assessment Act 1936 (which are about conditions that must be met for certain kinds of trusts to be able to deduct a bad debt); (iii) other provisions of this Act so far as they relate to a section listed in subparagraph (i) or (ii); and (c) these provisions did not apply: (i) subsections 165 ‑ 120(2) and (3); (ii) section 63G of the Income Tax Assessment Act 1936 ; (iii) section 267 ‑ 65 in Schedule 2F to that Act. Note 1: Some of the other provisions of this Act that relate to a section listed in subparagraph (2)(b)(i) are sections 165 ‑ 120, 165 ‑ 129 and 165 ‑ 132 and Subdivision 166 ‑ C. Note 2: Some of the other provisions of this Act that relate to a section listed in subparagraph (2)(b)(ii) are sections 266 ‑ 40, 266 ‑ 45, 266 ‑ 90, 266 ‑ 125, 266 ‑ 165, 267 ‑ 30, 267 ‑ 35, 267 ‑ 40 and 267 ‑ 45 in Schedule 2F to the Income Tax Assessment Act 1936 . Debt test income year (3) The table shows when the debt test income year starts and ends. Start and end of debt test income year If: The start of the debt test income year is: The end of the debt test income year is: 1 Both these conditions are met: (a) the entity that is owed the debt for the debt test period is the claimant; (b) the period ends at the time (the write ‑ off time ) the claimant actually writes off the debt or part of the debt The later of these times (or either of them if they are the same): (a) the start of the income year in which the write ‑ off time occurs; (b) the start of the debt test period The end of the income year in which the write ‑ off time occurs 2 Either: (a) the entity that is owed the debt for the debt test period is not the claimant; or (b) that entity is the claimant but that period ends before the claimant actually writes off the debt or part of the debt The later of these times (or either of them if they are the same): (a) 12 months before the end of the debt test period; (b) the start of the debt test period The end of the debt test period Continuity periods, ownership test periods and test periods (4) For the purposes of subsection (2), the modified provisions have effect as if: (a) the * first continuity period started at the start time shown in the table and ended at the start of the debt test income year; and (b) the * second continuity period were the debt test income year or, for the purposes of section 165 ‑ 123 and Subdivision 166 ‑ C defining periods by reference to the second continuity period, the period: (i) starting at the start of the debt test income year; and (ii) ending at the end time shown in the table; and (c) each section listed in subparagraph (2)(b)(ii) specified that the test period identified in the section: (i) started at the start time shown in the table; and (ii) ended at the end time shown in the table. Start time and end time If: The start time is: The end time is: 1 All these conditions are met: (a) the entity that is owed the debt for the debt test period is the claimant; (b) the period ends at the time (the write ‑ off time ) the claimant actually writes off the debt or part of the debt; (c) the claimant is the * head company of a * consolidated group at the write ‑ off time The start of the debt test period The end of the income year in which the write ‑ off time occurs 2 All these conditions are met: (a) the entity that is owed the debt for the debt test period is the claimant; (b) the period ends at the time (the write ‑ off time ) the claimant actually writes off the debt or part of the debt; (c) the claimant is not the * head company of a * consolidated group at the write ‑ off time Just before the start of the debt test period The end of the income year in which the write ‑ off time occurs 3 The debt test period: (a) starts at a time other than a time when the entity that is owed the debt for the period ceases to be a * member of a * consolidated group; and (b) ends when the entity becomes a member of such a group; (whether or not the entity was the * head company of another such group during the period) The start of the debt test period Just after the end of the debt test period 4 Both these conditions are met: (a) the entity that is owed the debt for the debt test period is the * head company of a * consolidated group; (b) the period ends when: (i) a * subsidiary member of the group becomes a * member of another consolidated group; or (ii) the entity ceases to be the head company of the group without becoming a member of another consolidated group The start of the debt test period The end of the debt test period 4A Both these conditions are met: (a) the entity that is owed the debt for the debt test period is the * head company of a * consolidated group; (b) the period ends when a * subsidiary member of the group ceases to be a * member of the group without becoming a member of another consolidated group The start of the debt test period The end of the debt test period 5 The debt test period: (a) starts when the entity that is owed the debt for the period ceases to be a * member of a * consolidated group; and (b) ends later when the entity becomes a member of a consolidated group Just before the start of the debt test period Just after the end of the debt test period (5) For the purposes of subsection (2), the modified provisions have effect as if section 267 ‑ 25 in Schedule 2F to the Income Tax Assessment Act 1936 applied in relation to debts whether they were incurred in the income year or an earlier income year. Test time for business continuity test under section 165 ‑ 126 (6) For the purposes of subsection (2), the modified provisions have effect as if subsection 165 ‑ 126(2) specified that the test time were the later of these times (or either of them if they are the same): (a) the first time at which it is not practicable to show that the company will meet the conditions in section 165 ‑ 123 (as modified by this section); (b) the time just after the start of the debt test period. Business at and just after the end of the debt test period (7) If: (a) the debt test period ends when the entity that was owed the debt for the period becomes a * member of a * consolidated group; and (b) under the modified provisions, the * business that the entity carried on at or just after the end of the period is relevant to the question whether the entity could have deducted the debt as described in subsection (2); those provisions have effect for the purposes of that subsection as if the entity carried on at those times the business it carried on just before the end of the period.

Amendment history: Inserted 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 162 of 2005, effective Schedule 2 (items 1–13), Schedule 3 (items 1–3, 16–19, 33) and Schedule 6 (items 28–32): Royal Assent Schedule 6 (items 1–5, 7–13): 1 July 2005 Sch 6 (items 6, 16–25): 1 July 2001 (s 2(1) items 4, 6) | Amended by No 110 of 2014, effective Sch 1 and Sch 2 (items 2–5, 13–23): 17 Oct 2014 (s 2(1) item 2) Sch 3, Sch 4 (items 1, 3) and Sch 5 (items 16–67, 74–76, 84–91, 98–121): 16 Oct 2014 (s 2(1) items 3–5, 7) | Amended by No 7 of 2019, effective Sch 1 (items 1–13, 33–164): 1 Apr 2019 (s 2(1) item 1)

s 709-220 — Limit on deduction of swap loss

Object (1) The object of this section is to limit the circumstances in which an entity can deduct a swap loss (as defined in section 63E of the Income Tax Assessment Act 1936 ) resulting from a debt/equity swap (as defined in that section) to circumstances similar to those in which this Subdivision lets an entity deduct a debt it writes off as bad. Modified operation of sections 709 ‑ 205, 709 ‑ 210 and 709 ‑ 215 (2) Sections 709 ‑ 205, 709 ‑ 210 and 709 ‑ 215 (except subsection 709 ‑ 215(2)) apply in relation to the extinction (however described) of a debt as part of a debt/equity swap in the same way as they apply in relation to the writing off of a debt as bad. (3) Subsection 709 ‑ 215(1): (a) applies in relation to a swap loss from a debt/equity swap in the same way as it applies in relation to a debt, or part of a debt; and (b) applies as if paragraph 709 ‑ 215(1)(a) referred to subsection 63E(3) of the Income Tax Assessment Act 1936 instead of sections 8 ‑ 1 and 25 ‑ 35. (4) This section has effect despite subsection 63E(5) of the Income Tax Assessment Act 1936 .

Amendment history: Inserted by No 162 of 2005, effective Schedule 2 (items 1–13), Schedule 3 (items 1–3, 16–19, 33) and Schedule 6 (items 28–32): Royal Assent Schedule 6 (items 1–5, 7–13): 1 July 2005 Sch 6 (items 6, 16–25): 1 July 2001 (s 2(1) items 4, 6)

s 711-1 — What this Division is about

If an entity ceases to be a subsidiary member of a consolidated group, the tax cost setting amount for the group’s membership interests in the entity reflects the group’s cost for the entity’s net assets. Table of sections Application and object of this Division 711 ‑ 5 Application and object of this Division Tax cost setting amount for membership interests etc. 711 ‑ 10 Tax cost setting amount worked out under this Division 711 ‑ 15 Tax cost setting amount where no multiple exit 711 ‑ 20 What is the old group’s allocable cost amount for the leaving entity? 711 ‑ 25 Terminating values of the leaving entity’s assets—step 1 in working out allocable cost amount 711 ‑ 30 What is the head company’s terminating value for an asset? 711 ‑ 35 If head company becomes entitled to certain deductions—step 2 in working out allocable cost amount 711 ‑ 40 Liabilities owed to the leaving entity by members of the old group—step 3 in working out allocable cost amount 711 ‑ 45 Liabilities etc. owed by the leaving entity—step 4 in working out allocable cost amount 711 ‑ 46 Liability arising from transfer or assignment of securitised assets 711 ‑ 55 Tax cost setting amount for membership interests where multiple exit 711 ‑ 65 Membership interests treated as having been acquired before 20 September 1985 711 ‑ 70 Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711 ‑ 65—application of Division 149 to head company 711 ‑ 75 Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711 ‑ 65—application of CGT event K6

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

s 711-5 — Application and object of this Division

Application (1) This Division has effect: (a) for the head company core purposes set out in subsection 701 ‑ 1(2); and (b) for the entity core purposes set out in subsection 701 ‑ 1(3); if an entity (the leaving entity ) ceases to be a * subsidiary member of a * consolidated group (the old group ) at a particular time (the leaving time ). Object (2) The object of this Division is, when entities cease to be * subsidiary members, to preserve the alignment of the * head company’s costs for * membership interests in entities and their assets that is established when entities become subsidiary members. Note: The reasons for preserving this alignment are set out in subsection 705 ‑ 10(3). (3) This is achieved by recognising the * head company’s cost for those interests, just before the leaving time, as an amount equal to the cost of the leaving entity’s assets at the leaving time reduced by the amount of its liabilities. (4) If multiple entities cease to be * subsidiary members at the same time, the cost of any * membership interests that one holds in another is treated in a similar way.

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)

s 711-10 — Tax cost setting amount worked out under this Division

If this Division applies, the amount of the following is worked out under the Division: (a) the * tax cost setting amount for the purposes of item 2 in the table in section 701 ‑ 60 for each * membership interest in the leaving entity that * members of the old group held; and (b) if 2 or more entities cease to be * subsidiary members of the group at the same time because of an event happening in relation to one of them—the tax cost setting amount for the purposes of item 4 in the table in that section for each membership interest that the leaving entity holds in any of the other entities.

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

s 711-15 — Tax cost setting amount where no multiple exit

(1) The * tax cost setting amount for each * membership interest in the leaving entity that * members of the old group held, where paragraph 711 ‑ 10(b) does not apply, is worked out by: (a) first, working out the old group’s * allocable cost amount for the leaving entity in accordance with section 711 ‑ 20; and (b) next, if there is more than one class of membership interests in the leaving entity—allocating the allocable cost amount to each class in proportion to the * market value of all of the membership interests in the class; and (c) next, allocating the result under paragraph (a) or (b) to each of the membership interests, or membership interests in the class, by dividing the result by the number of those membership interests; and (d) finally, if the leaving entity is a trust—for each membership interest in the trust that satisfies these conditions: (i) it is neither a unit nor an interest in the trust; (ii) the member of the old group that held it began to hold it only because money or property was settled on the trust; (iii) it either had no * cost base or it had a cost base of nil; reducing the result under paragraph (c) to nil. Note: Compare the treatment of such interests when an entity joins a group: see section 713 ‑ 20. Non ‑ membership equity interests (2) For the purposes of this section, if at the leaving time a * member of the old group holds a * non ‑ membership equity interest in the leaving entity, that non ‑ membership equity interest is treated as if: (a) it were a * membership interest in the leaving entity; and (b) it were of a different class than any other membership interest in the leaving entity.

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 711-20 — What is the old group’s allocable cost amount for the leaving entity?

(1) Work out the old group’s allocable cost amount for the leaving entity in this way: Working out the old group’s allocable cost amount for the leaving entity Step What the step requires Purpose of the step 1 Start with the step 1 amount worked out under section 711 ‑ 25, which is about the * terminating values of the leaving entity’s assets just before the leaving time. To ensure that the allocable cost amount includes the cost of the assets. 2 Add to the result of step 1 the step 2 amount worked out under section 711 ‑ 35, which is about the value of deductions inherited by the leaving entity that are not reflected in the * terminating value of the leaving entity’s assets just before the leaving time. To ensure that the value of the deductions is reflected in the allocable cost amount. 3 Add to the result of step 2 the step 3 amount worked out under section 711 ‑ 40, which is about liabilities owed by * members of the old group to the leaving entity at the leaving time. To ensure that the liabilities, which are not recognised while the leaving entity is taken to be part of the * head company by subsection 701 ‑ 1(1), are reflected in the allocable cost amount. 4 Subtract from the result of step 3 the step 4 amount worked out under section 711 ‑ 45, which is about: (a) the leaving entity’s liabilities just before the leaving time; and (b) * membership interests in the leaving entity that are not held by * members of the old group. To ensure that the allocable cost amount is reduced to reflect the liabilities and the value of the membership interests. 5 If the amount remaining after step 4 is positive, it is the old group’s allocable cost amount for the leaving entity. Otherwise the old group’s allocable cost amount is nil. Note: If the amount remaining after step 4 is negative, the head company is taken to have made a capital gain equal to the amount: see CGT event L5. Recalculation in order to work out amount of capital loss (2) If it is necessary to work out whether the * head company makes a capital loss for a * CGT event that happens at or after the leaving time in relation to any of the * membership interests, the old group’s allocable cost amount for the leaving entity is instead worked out as if the head company’s * terminating value for any asset covered by subsection 705 ‑ 30(4) (as it applies for the purposes of section 711 ‑ 30) were instead equal to the asset’s * reduced cost base just before the leaving 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 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)

s 711-25 — Terminating values of the leaving entity’s assets—step 1 in working out allocable cost amount

(1) For the purposes of step 1 in the table in subsection 711 ‑ 20(1), the step 1 amount is worked out by adding up the * head company’s * terminating values of all the assets that the head company holds at the leaving time because the leaving entity is taken by subsection 701 ‑ 1(1) (the single entity rule) to be a part of the head company. Goodwill (2) If loss of control and ownership of the leaving entity by the * head company would decrease the * market value of the goodwill associated with assets or businesses of the old group (other than those of the leaving entity), the head company’s * cost base of the asset consisting of goodwill that it holds at the leaving time because of its control and ownership of the leaving entity is added to the step 1 amount. Note: If the asset arose because the head company acquired control and ownership of a joining entity, subsection 705 ‑ 35(3) would have applied in relation to the joining entity. The asset could also have arisen e.g. because the head company acquired a business from an entity without acquiring the entity. Increase in step 1 amount for certain former privatised assets (3) If: (a) the * head company of the old group * holds a * depreciating asset at the leaving time because the leaving entity is taken by subsection 701 ‑ 1(1) (the single entity rule) to be a part of the head company; and (b) the asset’s * tax cost was set at the * tax cost setting amount when an entity (whether the leaving entity or another entity) became a * subsidiary member of the old group; and (c) the tax cost setting amount for the asset was reduced because of section 705 ‑ 47 (which is about certain assets that were * privatised assets); the amount of the reduction is added to the step 1 amount. Increase in step 1 amount for certain privatised assets (4) If: (a) the * head company of the old group * holds a * depreciating asset at the leaving time because the leaving entity is taken by subsection 701 ‑ 1(1) (the single entity rule) to be a part of the head company; and (b) the first element of the * cost of the asset was worked out by reference to subsection 58 ‑ 70(5) because a * member of the old group acquired the asset as described in subsection 58 ‑ 5(4) on or after 1 July 2002; and (c) the amount of the first element of the cost of the asset is less than the amount it would have been apart from item 11 of the table in subsection 40 ‑ 180(2) (which makes subsection 58 ‑ 70(5) relevant to working out that element); the difference between the amounts is added to the step 1 amount.

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 711-30 — What is the head company’s terminating value for an asset?

(1) The * head company’s terminating value for an asset that it holds at the leaving time because the leaving entity is taken by subsection 701 ‑ 1(1) to be a part of the head company is worked out as follows. (2) The amount is worked out by applying section 705 ‑ 30 in a corresponding way to the way that section applies to work out the * terminating value for an asset that a joining entity holds at the joining time. (3) However, that amount is the asset’s * market value at the leaving time if: (a) the asset is a right to receive lease payments under a lease; and (b) the asset’s * tax cost was set when an entity (whether the leaving entity or another entity) became a * subsidiary member of the old group; and (c) the asset was taken to be a * retained cost base asset for the purposes of Division 705 when its tax cost was set, because of paragraph 705 ‑ 56(3)(b).

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 14 of 2009, effective Schedule 1, Schedule 4 (items 11–34, 52) and Schedule 5 (items 7–13): Royal Assent Schedule 5 (items 2, 3, 14): 29 Jan 2009 Schedule 5 (items 5, 6): 1 July 2011

s 711-35 — If head company becomes entitled to certain deductions—step 2 in working out allocable cost amount

(1) Work out the step 2 amount for the purposes of the table in subsection 711 ‑ 20(1) by multiplying all deductions covered by subsection (2) by the * corporate tax rate. (2) This subsection covers any deduction to which the leaving entity becomes entitled under section 701 ‑ 40 as a result of the leaving entity ceasing to be a * subsidiary member of the old group, other than a deduction for expenditure: (a) that is, forms part of or reduces, the cost of an asset that becomes an asset of the leaving entity because subsection 701 ‑ 1(1) (the single entity rule) ceases to apply; or (b) to which section 110 ‑ 40 (about expenditure on assets acquired before 7.30 pm on 13 May 1997) applies. (3) Subsection (2) does not cover a deduction under section 43 ‑ 15 (which relates to * undeducted construction expenditure) if, because of section 701 ‑ 40 (the exit history rule), the leaving entity is taken to have * 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 711-40 — Liabilities owed to the leaving entity by members of the old group—step 3 in working out allocable cost amount

For the purposes of step 3 in the table in subsection 711 ‑ 20(1), the step 3 amount is the total, for all liabilities owed by * members of the old group to the leaving entity at the leaving time, of the * tax cost setting amounts of the corresponding assets of the leaving entity. Note: The tax cost of a corresponding asset of the leaving entity is set under section 701 ‑ 45. The tax cost setting amount of the corresponding asset is determined under section 701 ‑ 60A.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Repealed and substituted by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4)

s 711-45 — Liabilities etc. owed by the leaving entity—step 4 in working out allocable cost amount

(1) For the purposes of step 4 in the table in subsection 711 ‑ 20(1), the step 4 amount is worked out by adding up the amounts of each thing (an accounting liability ) that, in accordance with the leaving entity’s * accounting principles for tax cost setting, is a liability of the leaving entity just before the leaving time. Leaving entity’s accounting principles for tax cost setting (1A) The leaving entity’s accounting principles for tax cost setting are the * accounting principles that the group would use if it were to prepare its financial statements just before the leaving time (disregarding subsection 701 ‑ 1(1) (the single entity rule)). 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 leaving 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 ‑ 575(2)(a) or (b) (certain assets of life insurance company). Exclusion where transfer of accounting liability (2) An amount is not to be added for an accounting liability that arises because of the leaving 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. Exclusion where liability is obligation to make lease payments (2A) An amount is not to be added for an accounting liability that is the leaving entity’s obligation as lessee to make lease payments under a lease, if: (a) subsection 705 ‑ 56(4) applied in relation to the liability, at a time when an entity (whether the leaving entity or another entity) became a * subsidiary member of the old group; and (b) the liability was not taken into account under subsection 705 ‑ 70(1) at that time, because of paragraph 705 ‑ 56(4)(b). Reduction for future deduction (3) If some or all of an accounting liability will result in a deduction to the leaving entity, the amount to be added for the accounting liability 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 (1) to take account of the future availability of the deduction. Amount for intra ‑ group liabilities (4) If an accounting liability of the leaving entity is owed to a * member of the old group, the amount to be added for the liability is the * tax cost setting amount of the corresponding asset of the member. Adjustment for unrealised gains and losses (5) If, 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 old group) is taken into account at a later time than is the case in accordance with the leaving entity’s * accounting principles for tax cost setting, the amount to be added for the accounting liability is equal to the payment that would be necessary to discharge the liability just before the leaving time without an amount being included in the assessable income of, or allowable as a deduction to, the * head company. Note: An example is accrued employee leave entitlements or foreign exchange gains and losses. Increase in step 4 amount for employee share interests (6) If any * membership interest (an employee share interest ) in the leaving entity needed to be disregarded under section 703 ‑ 35 in order for the leaving entity to be a * wholly ‑ owned subsidiary of the * head company at the leaving time, the step 4 amount is increased by the sum of the * market values of those interests. Increase to cover ADI restructure preference share interests (6A) If any * share in the leaving entity needed to be disregarded under section 703 ‑ 37 in order for the leaving entity to be a * wholly ‑ owned subsidiary of the * head company at the leaving time, the step 4 amount is increased by the sum of the * market values of those shares. Increase for non ‑ share capital account balance (6B) The step 4 amount is increased by the amount that would be the balance of the leaving entity’s * non ‑ share capital account, assuming that: (a) if the leaving entity is not a company—the leaving entity were a company; and (b) each * non ‑ membership equity interest (if any) in the leaving entity held at just before the leaving time by a person other than a * member of the old group were a * non ‑ share equity interest in the leaving entity; and (c) the non ‑ share equity interests (if any) mentioned in paragraph (b) were the only non ‑ share equity interests in the leaving entity. Increase to cover certain equity interests (7) The step 4 amount is increased by the * market value of each thing that, in accordance with the leaving entity’s * accounting principles for tax cost setting, is equity in the leaving entity at the leaving time, where the thing is also a * debt interest. Adjustment where amount of liability differed for purpose of calculating allocable cost amount on entry (8) Subsection (10) applies if: (a) either: (i) an amount (the exit liability amount ) was added for a particular liability under subsection (5); or (ii) a particular liability is covered by subsection (5), but no amount was added for it under that subsection (in which case the exit liability amount is zero); and (b) the liability was taken into account in working out the * allocable cost amount (the original entry ACA ) for a * subsidiary member (whether or not the leaving entity) of the old group in accordance with Division 705; and (c) the exit liability amount is not the same as the amount (the entry liability amount ) of the liability that was taken into account in working out the original entry ACA, after any adjustments made under: (i) section 705 ‑ 70, 705 ‑ 75 or 705 ‑ 80; and (ii) subsection (9) of this section; and (d) if the liability is a provision for annual leave or long service leave, or a provision for a liability contingent on a future event: (i) in the case of a liability that was, in accordance with the * accounting principles that the entity would have used if it had prepared its financial statements just before the time it became a subsidiary member of the group, a current liability of the entity at that time—the leaving time occurs less than 1 year after that time; or (ii) otherwise—the leaving time occurs less than 4 years after that time. (9) Make these adjustments to the entry liability amount if, at a time when the leaving entity was a * subsidiary member of the old group, the * head company of the group paid an amount that reduced the liability: (a) reduce the entry liability amount by the amount of the reduction; and (b) if the payment gave rise to an amount being included in the assessable income of the head company—after making the reduction in paragraph (a), further reduce the entry liability amount by the product of: (i) the amount included in assessable income; and (ii) the * corporate tax rate; and (c) if the payment gave rise to a deduction for the head company—after making the reduction in paragraph (a), increase the entry liability amount by the product of: (i) the amount deducted; and (ii) the corporate tax rate. (10) The step 4 amount is altered by: (a) if the entry liability amount exceeds the exit liability amount—increasing the step 4 amount by the excess; or (b) if the entry liability amount falls short of the exit liability amount—decreasing the step 4 amount by the shortfall. Exclusion of amounts for certain securitisation liabilities (11) An amount is not to be added for an accounting liability of the leaving entity if the accounting liability is covered under section 711 ‑ 46 (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 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 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) | 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 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) | Amended by No 14 of 2018, effective Sch 1: 1 Apr 2018 (s 2(1) items 2–4) | 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 711-46 — 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 4 amount mentioned in subsection 711 ‑ 45(1) in relation to the leaving entity, an amount would be added under that subsection for the securitisation liability (disregarding subsection 711 ‑ 45(11)); (c) a member of the old group transferred or equitably assigned one or more assets (the underlying securitised assets ) to another entity before the leaving 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 leaving entity at the leaving time (according to the leaving 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 leaving time; (g) at the leaving time the * market value of the leaving 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)