Income Tax (Transitional Provisions) Act 1997

s 701-50 — Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity

Application (1) This section provides for an addition to the step 1 amount for working out under section 711 ‑ 20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity ) that ceases to be a subsidiary member of the transitional group at a time (the leaving time ), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701 ‑ 1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. If entity sale situation affected asset’s cost for chosen transitional entity (2) If: (a) at a time before the chosen transitional entity became a subsidiary member of the transitional group: (i) all of that entity’s ordinary income and statutory income was not assessable income; and (ii) that entity held the asset; and (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); the excess is added to the step 1 amount. (3) Work out the amount for the purposes of paragraph (2)(c) using the following table: Amount for paragraph (2)(c) If, because of the circumstances described in paragraphs (2)(a) and (b): The amount is: 1 One of the following provisions applied to the entity: (a) former section 61A of the Income Tax Assessment Act 1936 ; (b) former Subdivision 57 ‑ I in Schedule 2D to the Income Tax Assessment Act 1936 ; (c) former subsection 58 ‑ 20(4) of the Income Tax Assessment Act 1997 The difference between: (a) the amount treated as being the cost of the asset under that provision; and (b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision 2 One of the following subsections of the Income Tax Assessment Act 1997 applied to the entity: (a) former subsection 58 ‑ 20(5); (b) 58 ‑ 70(3) The amount treated as being the cost, or the first element of the cost, of the asset under that subsection If asset sale situation affected asset’s cost for chosen transitional entity (4) If: (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997 , as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and (d) that amount is less than it would have been apart from that provision; the difference is added to the step 1 amount. Amounts and provisions for different dates of acquisition Date of the acquisition Amount Provision of Division 58 of the Income Tax Assessment Act 1997 applying to the acquisition and the working out of the amount 1 Before 1 July 2001 Cost of the asset Former section 58 ‑ 160 2 Before 1 July 2001 Cost of the asset Former section 58 ‑ 220 3 After 30 June 2001 First element of the cost of the asset Subsection 58 ‑ 70(5) Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and (b) that effect extended to the chosen transitional entity because of roll ‑ over relief.

Amendment history: Inserted by No 83 of 2004, effective Sch 1 (items 80–83): 30 June 2000 (s 2(1) item 2) Sch 2 (items 1, 19, 34, 75, 76): 25 June 2004 (s 2(1) items 13, 16) Sch 2 (item 9): 24 Oct 2002 (s 2(1) item 15) | Amended by No 101 of 2006, effective Schedules 3 and 4: 1 Jan 2008 Remainder: Royal Assent

s 701A-1 — Continuing majority ‑ owned entity, designated group etc.

Continuing majority ‑ owned entity and designated group (1) If: (a) an entity becomes a subsidiary member of a consolidated group at any time on or after 1 July 2002; and (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; the entity is a continuing majority ‑ owned entity and the group is the entity’s designated group . Majority owners of an entity (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. Interposed non ‑ fixed trust to be treated as fixed trust (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: (a) it is treated as if it were a fixed trust; and (b) all of its objects are treated as if they were beneficiaries of that trust with equal interests in it.

Amendment history: Inserted by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11)

s 701A-5 — Modified application of Part 3 ‑ 90 of Income Tax Assessment Act 1997 to trading stock of continuing majority ‑ owned entity

(1) The operation of Part 3 ‑ 90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority ‑ owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. Continuing majority ‑ owned entity to revalue its trading stock under normal provisions (2) For the entity core purposes: (a) subsection 701 ‑ 35(4) of the Income Tax Assessment Act 1997 does not apply in relation to the asset; and (b) instead, the value of the asset at the end of the income year that ends, or, if section 701 ‑ 30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70 ‑ 45 to 70 ‑ 70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year ‑ end valuation (3) For the head company core purposes when the continuing majority ‑ owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b).

Amendment history: Inserted by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11)

s 701A-7 — Modified application of Part 3 ‑ 90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority ‑ owned entity

(1) The operation of Part 3 ‑ 90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority ‑ owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. Continuing majority ‑ owned entity to revalue its registered emissions units under normal provisions (2) For the entity core purposes: (a) subsection 701 ‑ 35(5) of the Income Tax Assessment Act 1997 does not apply in relation to the asset; and (b) instead, the value of the asset at the end of the income year that ends, or, if section 701 ‑ 30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420 ‑ 51 to 420 ‑ 58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year ‑ end valuation (3) For the head company core purposes when the continuing majority ‑ owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b).

Amendment history: Inserted by No 132 of 2011, effective Sch 2 (items 72, 72A): 2 Apr 2012 (s 2(1))

s 701A-10 — Modified application of Part 3 ‑ 90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority ‑ owned entity

(1) This section applies if: (a) because subsection 701 ‑ 1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority ‑ owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority ‑ owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (c) the asset existed at the start of 27 June 2002; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority ‑ owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority ‑ owned entity became a subsidiary member of the group, there was roll ‑ over relief under section 40 ‑ 340 of the Income Tax Assessment Act 1997 . Reduced depreciation deductions etc. for head company (2) If this section applies, for the head company core purposes: (a) while the asset is, because subsection 701 ‑ 1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997 , its tax cost setting amount is taken to be equal to the continuing majority ‑ owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (i) the deductions for its decline in value up to that time worked out on the basis in paragraph (a); are less than: (ii) the deductions that would have been worked out using its actual tax cost setting amount; then: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711 ‑ 30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997 . Reduced depreciation deductions etc. for acquirer from head company (3) If: (a) the asset is acquired by another entity (a new asset holder ) from the head company; and (b) at the time of the acquisition: (i) either party to the acquisition controls (for value shifting purposes) the other; or (ii) a third entity controls (for value shifting purposes) the parties to the acquisition; and (c) the following amount: (i) the asset’s adjustable value (the roll ‑ over adjustable value ) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority ‑ owned entity’s terminating value for the asset; is less than: (ii) the asset’s cost to the new asset holder; then the consequences in subsection (4) occur. (4) The consequences are as follows: (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997 , the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll ‑ over adjustable value; (b) if a balancing adjustment event occurs for the asset and: (i) the deductions for its decline in value up to that time, worked out on the basis in paragraph (a); are less than: (ii) the deductions that would otherwise have been worked out; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. Reduced depreciation deductions etc. for entity that ceases to be a subsidiary member (5) If: (a) the asset becomes that of an entity (a new asset holder ) other than the head company because subsection 701 ‑ 1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder ) acquiring some or all of the membership interests in the new asset holder; and (b) at the time of the acquisition: (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (c) the following amount: (i) the asset’s adjustable value (the roll ‑ over adjustable value ) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority ‑ owned entity’s terminating value for the asset; is less than: (ii) the asset’s cost to the new asset holder; then the consequences in subsection (6) occur. (6) The consequences are as follows: (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997 , the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll ‑ over adjustable value; and (b) if a balancing adjustment event occurs for the asset and: (i) the deductions for its decline in value up to that time worked out on the basis in paragraph (a); are less than: (ii) the deductions that would otherwise have been worked out; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. Reduced depreciation deductions etc. for later acquirer (7) If: (a) the asset is acquired by another entity (a new asset holder ) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (b) an entity: (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (d) the following amount: (i) the asset’s adjustable value (the roll ‑ over adjustable value ) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll ‑ over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; is less than: (ii) the asset’s cost to the new asset holder; then the consequences in subsection (8) occur. (8) The consequences are as follows: (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997 , the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll ‑ over adjustable value asset just before the acquisition; and (b) if a balancing adjustment event occurs for the asset and: (i) the deductions for its decline in value up to that time worked out on the basis in paragraph (a); are less than: (ii) the deductions that would otherwise have been worked out; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset.

Amendment history: Inserted by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11)

s 701B-1 — Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1

(1) This section applies if: (a) CGT event L1 happens; and (b) members of the consolidated group or the MEC group mentioned in subsection 104 ‑ 500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701 ‑ 1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. Excepted assets (2) For the purposes of paragraph (1)(d), excepted assets are assets that: (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701 ‑ 1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (b) were minor assets, having regard to the nature and size of that business. Immediate availability of capital loss or net capital loss (3) If this section applies, neither subsection 104 ‑ 500(4) nor subsection 104 ‑ 500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year.

Amendment history: Inserted by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11) | Amended by No 107 of 2003, effective Schedule 2 (items 6, 13, 14, 35–37, 40) and Schedule 7 (item 10): Royal Assent

s 701C-1 — Overview

This Division: (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703 ‑ 15(2) of the Income Tax Assessment Act 1997 , rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C ‑ B); and (b) modifies certain rules in Part 3 ‑ 90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C ‑ C). Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719 ‑ 2 and 719 ‑ 10 of this Act).

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 701C-10 — Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company

(1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703 ‑ 15(2) of the Income Tax Assessment Act 1997 , a set of requirements that must be met for an entity (the test entity ) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time ). Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703 ‑ 15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719 ‑ 10(1)(b)(ii) of that Act (see subsection 719 ‑ 2(3) of this Act). Test entity must be company (2) At the test time, the test entity must be a company. At least one interposed entity must be a non ‑ resident company or non ‑ resident trust (3) At the test time, at least one of the interposed entities must be: (a) a company (a non ‑ resident company ) that is a foreign resident; or (b) a trust (a non ‑ resident trust ) that does not meet the requirements in any item of the table in section 703 ‑ 25 of the Income Tax Assessment Act 1997 . The interposed entities must all be of a particular kind (4) At the test time, each of the interposed entities must be: (a) a subsidiary member of the group; or (b) a non ‑ resident company; or (c) a non ‑ resident trust; or (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non ‑ resident company or a non ‑ resident trust; or (e) a partnership, each of the partners in which is a non ‑ resident company or a non ‑ resident trust. Test entity must be a subsidiary member on assumption that non ‑ resident companies and non ‑ resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non ‑ resident company or non ‑ resident trust were a subsidiary member of the group. Additional requirement for consolidatable groups (6) If the group is a consolidatable group, the test time must be before 1 July 2004. Additional requirement for consolidated groups at formation (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. Additional requirement for consolidated groups after formation (8) If: (a) the group is a consolidated group; and (b) the test time is after the group comes into existence; and (c) at the test time, one or more of the membership interests in the test entity are held by: (i) a non ‑ resident company; or (ii) a non ‑ resident trust; or (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non ‑ resident company or a non ‑ resident trust; or (iv) a partnership, each of the partners in which is a non ‑ resident company or a non ‑ resident trust; then: (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv).

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 701C-15 — Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership

(1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703 ‑ 15(2) of the Income Tax Assessment Act 1997 , a set of requirements that must be met for an entity (the test entity ) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time ). Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703 ‑ 15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719 ‑ 10(1)(b)(iii) of that Act (see subsection 719 ‑ 2(3) of this Act). Test entity must be a trust or partnership (2) At the test time, the test entity must be a trust or partnership. At least one interposed entity must be a company that is a subsidiary member because of section 701C ‑ 10 (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C ‑ 10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3).

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 701C-20 — Transitional foreign ‑ held subsidiaries and transitional foreign ‑ held indirect subsidiaries

If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C ‑ 10 are met; and (b) one or more of the membership interests in the entity are held by: (i) a non ‑ resident company; or (ii) a non ‑ resident trust; or (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non ‑ resident company or a non ‑ resident trust; or (iv) a partnership, each of the partners in which is a non ‑ resident company or a non ‑ resident trust; then: (c) the entity is a transitional foreign ‑ held subsidiary of the group; and (d) if: (i) the transitional foreign ‑ held subsidiary; or (ii) an entity that is a transitional foreign ‑ held indirect subsidiary of the group because of another application of this paragraph; holds one or more membership interests in another entity that: (iii) is a subsidiary member of the group; and (iv) is not a transitional foreign ‑ held subsidiary of the group; that other member is a transitional foreign ‑ held indirect subsidiary of the group. Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign ‑ held indirect subsidiary would need to have satisfied the set of requirements in either section 701C ‑ 10 or 701C ‑ 15

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 701C-25 — Application and object of this Subdivision

Application (1) This Subdivision applies if an entity (the transitional foreign ‑ held joining entity ) that is a transitional foreign ‑ held subsidiary or a transitional foreign ‑ held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time ) the group comes into existence. Object (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign ‑ held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign ‑ held indirect subsidiary that becomes a subsidiary member at that time takes account of this.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 701C-30 — Transitional foreign ‑ held subsidiary to be treated as part of head company

The following provisions: (a) section 701 ‑ 10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); (b) Subdivision 705 ‑ A of that Act, in its application in accordance with Subdivision 705 ‑ B of that Act; apply, for the purposes of setting the tax cost of an asset of the transitional foreign ‑ held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign ‑ held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign ‑ held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign ‑ held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign ‑ held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign ‑ held subsidiary and the other entity. Note 2: If the transitional foreign ‑ held joining entity is a transitional foreign ‑ held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705 ‑ A of the Income Tax Assessment Act 1997 , in its application in accordance with Subdivision 705 ‑ B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17) | Amended by No 67 of 2003, effective Sch 5 (items 4–10), Sch 6 and 7: 24 Oct 2002 (s 2(1) item 3) Sch 10 (item 24): 30 June 2003 (s 2(1) item 10)

s 701C-35 — Trading stock value not set for assets of transitional foreign ‑ held subsidiaries

Subsection 701 ‑ 35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax ‑ neutral amount) does not apply to the assets of the transitional foreign ‑ held joining entity if it is a transitional foreign ‑ held subsidiary.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17) | Amended by No 67 of 2003, effective Sch 5 (items 4–10), Sch 6 and 7: 24 Oct 2002 (s 2(1) item 3) Sch 10 (item 24): 30 June 2003 (s 2(1) item 10)

s 701C-40 — Cost setting rules for exit cases—modification of core rules

Section 701 ‑ 15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: Application to transitional foreign ‑ held subsidiaries (4) If an entity that ceases to be a subsidiary member is a transitional foreign ‑ held subsidiary when it does so: (a) this section applies to each membership interest in the transitional foreign ‑ held subsidiary that is held by an entity (an eligible non ‑ resident ) of a kind mentioned in subparagraph 701C ‑ 20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign ‑ held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701 ‑ 1(2) of the Income Tax Assessment Act 1997 applies to the eligible non ‑ resident in the same way as it applies to the head company.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 701C-50 — Cost setting rules for exit cases—reference to modification of core rule

Section 711 ‑ 5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: Note: If the leaving entity is a transitional foreign ‑ held subsidiary (within the meaning of section 701C ‑ 20 of the Income Tax (Transitional Provisions) Act 1997) , this Division will, in accordance with subsection 701 ‑ 15(4) of this Act (see section 701C ‑ 40 of the first ‑ mentioned Act), apply to membership interests that an eligible non ‑ resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 701D-1 — Object of this Division

(1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936 ) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707 ‑ C of the Income Tax Assessment Act 1997 . (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period.

Amendment history: Inserted by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8) | Amended by No 143 of 2007, effective Schedule 1 (items 5, 195–205, 222, 225, 226), Schedule 5 (items 18–25, 48(1), (2)) and Schedule 7 (items 97, 98): Royal Assent Sch 1 (item 227): 30 June 2014

s 701D-10 — Transitional foreign loss maker not member of group if certain conditions satisfied

(1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker ) is not a subsidiary member of a consolidated group at a particular time (the transitional time ) if: (a) the group came into existence at a particular time (the formation time ) before 1 July 2004; and (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (c) the transitional time is not later than 3 years after the formation time; and (d) the head company of the group has made a choice under section 701D ‑ 15 to apply this section to the transitional foreign loss maker; and (e) the continuous ownership condition in subsection (2) is satisfied; and (f) the foreign loss condition in subsection (3) is satisfied; and (g) the no ‑ subsidiary condition in subsection (4) is satisfied. Continuous ownership condition (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly ‑ owned subsidiary of the entity that became the head company of the group throughout the period: (a) beginning at the start of 1 July 2002; and (b) ending at the transitional time. Foreign loss condition (3) The foreign loss condition is satisfied if: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936 ) in respect of the 2001 ‑ 02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997 . No ‑ subsidiary condition (4) The no ‑ subsidiary condition is satisfied if, at the transitional time: (a) the transitional foreign loss maker does not hold any membership interests in any other entity; or (b) both of the following conditions are satisfied: (i) the transitional foreign loss maker holds one or more membership interests in one or more other entities; (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. Transitional foreign loss maker stays in consolidatable group (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (a) subsection 126 ‑ 50(6) of the Income Tax Assessment Act 1997 ; and (b) paragraphs 170 ‑ 5(2A)(b) and 170 ‑ 105(2A)(b) of that Act; and (c) subparagraph 820 ‑ 599(1)(b)(iii) of that Act.

Amendment history: Amended by No 83 of 2004, effective Sch 1 (items 80–83): 30 June 2000 (s 2(1) item 2) Sch 2 (items 1, 19, 34, 75, 76): 25 June 2004 (s 2(1) items 13, 16) Sch 2 (item 9): 24 Oct 2002 (s 2(1) item 15) | Inserted by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8) | Amended by No 64 of 2005, effective Schedule 3 (items 38, 39): Royal Assent | Amended by No 143 of 2007, effective Schedule 1 (items 5, 195–205, 222, 225, 226), Schedule 5 (items 18–25, 48(1), (2)) and Schedule 7 (items 97, 98): Royal Assent Sch 1 (item 227): 30 June 2014

s 701D-15 — Choice to apply transitional rules to entity

(1) The head company of a consolidated group may make a choice in the approved form to apply section 701D ‑ 10 to another entity. (2) However, the head company cannot make that choice if subsection 701D ‑ 10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (3) The choice must be made by the later of: (a) the day on which the head company must give the notice under section 703 ‑ 58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (b) 30 days after the Taxation Laws Amendment Act (No. 1) 2004 received the Royal Assent. (4) The choice cannot be revoked.

Amendment history: Inserted by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8) | Amended by No 56 of 2010, effective s 4(2), Sch 3 (items 8, 10(1)), Sch 5 (items 54, 55, 73–78, 130, 131, 137–140, 189, 190, 193) and Sch 6 (items 156–158): 3 June 2010 (s 2(1) items 1, 7, 8, 10, 11, 23)

s 702-1 — Modified application of section 40 ‑ 77 of this Act to assets that an entity brings into a consolidated group

(1) This section applies if: (a) an entity becomes a subsidiary member of a consolidated group; and (b) just before it does so, section 40 ‑ 77 of this Act applies to an asset that it holds. (2) For so long as the asset continues to be: (a) an asset of the head company because subsection 701 ‑ 1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701 ‑ 55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: (c) subsection 40 ‑ 77(1) continues to apply to the asset; and Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40 ‑ 77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40 ‑ 77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40 ‑ 285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 7–9, Sch 14 (items 16, 19) and Sch 15 (item 2): 24 Oct 2002 (s 2(1) items 1, 2, 4)

s 702-4 — Extended operation of subsection 40 ‑ 285(3)

(1) This section applies in relation to a balancing adjustment event that occurs: (a) for a depreciating asset held by an entity (the final entity ); and (b) after the asset became an asset of the head company of a consolidated group because of section 701 ‑ 1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). Note: The final entity will be different from the head company if an entity (the leaving entity ) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40 ‑ 285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701 ‑ 55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. Note: The final entity will be entitled to the deduction apart from paragraph 701 ‑ 55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701 ‑ 5 (the entry history rule) of that Act and perhaps also section 701 ‑ 40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701 ‑ 1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity ) became a subsidiary member of the group; and (b) the tax cost setting amount for the asset was more than the joining entity’s terminating value for the asset. It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). Note: In some cases, section 705 ‑ 47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40 ‑ 285(3) of this Act.

Amendment history: Inserted by No 83 of 2004, effective Sch 1 (items 80–83): 30 June 2000 (s 2(1) item 2) Sch 2 (items 1, 19, 34, 75, 76): 25 June 2004 (s 2(1) items 13, 16) Sch 2 (item 9): 24 Oct 2002 (s 2(1) item 15)

s 702-5 — Modified application of subsection 40 ‑ 285(6) of this Act after entity brings assets into consolidated group

If: (a) an entity becomes a subsidiary member of a consolidated group; and (b) because subsection 701 ‑ 1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and (c) a balancing adjustment event happens in relation to the asset while it is an asset of the head company; subsection 40 ‑ 285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701 ‑ 10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997 . Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 7–9, Sch 14 (items 16, 19) and Sch 15 (item 2): 24 Oct 2002 (s 2(1) items 1, 2, 4)

s 703-30 — Debt interests that are not membership interests

(1) For the purposes of Part 3 ‑ 90 of the Income Tax Assessment Act 1997 , this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960 ‑ G of that Act whether the interest or right is a membership interest of the entity in the other entity. Note: Under Subdivision 960 ‑ G of the Income Tax Assessment Act 1997 , a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001 ) apply to transactions in relation to the interest or right at the relevant time.

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

s 703-35 — Employee share schemes

Despite the amendments of section 703 ‑ 35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 , subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement.

Amendment history: Inserted by No 133 of 2009, effective Schedule 1 (items 77, 83–87) and Schedule 2 (items 14, 15(b)): 14 Dec 2009

s 705-300 — Application and object of this Subdivision

(1) If an entity (the joining entity ) to which section 40 ‑ 75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time ), this Subdivision applies in relation to: (a) depreciating assets that: (i) caused section 40 ‑ 75 of this Act to apply to the joining entity; and (ii) became assets of the head company of the group at the joining time because of section 701 ‑ 1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40 ‑ 35, 40 ‑ 37, 40 ‑ 40 and 40 ‑ 43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; to affect the operation of Division 40, section 701 ‑ 55 and Division 705 of that Act. (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure.

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 705-305 — Rules affecting depreciating assets

(1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). Prime cost method of working out decline in value of asset (2) If the joining entity could not deduct an amount under Subdivision 40 ‑ B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701 ‑ 55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. Note: This may affect both the method of working out the decline in value of the asset and the asset’s effective life. Adjustable value of asset (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40 ‑ 35, 40 ‑ 37, 40 ‑ 40 or 40 ‑ 43 treated the joining entity as holding a notional asset. Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705 ‑ 30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. Cost of asset (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. Earlier deductions for decline in value of asset (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. Example: Such deductions include: (a) deductions under former Subdivision 330 ‑ A, 330 ‑ C or 330 ‑ H of the Income Tax Assessment Act 1997 , or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40 ‑ 35, 40 ‑ 37, 40 ‑ 40 or 40 ‑ 43 of this Act treated an entity as holding because of the expenditure. Effective life of asset (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (a) the remainder of the effective life of the asset, worked out just before the joining time; (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40 ‑ 35, 40 ‑ 37, 40 ‑ 40 or 40 ‑ 43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); (c) any other relevant matters. Subsection 701 ‑ 55(2) of that Act has effect subject to this subsection. Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40 ‑ 75(4) of this Act, but may have been reset since under Subdivision 40 ‑ B of the Income Tax Assessment Act 1997 . Note 2: The effective life of a notional asset is specified by whichever one of sections 40 ‑ 35, 40 ‑ 37, 40 ‑ 40 and 40 ‑ 43 of this Act is relevant to the notional asset. Choosing to reduce tax cost setting amount of asset (8) If: (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (b) the head company of the consolidated group chooses to apply this subsection to the asset; the asset’s tax cost setting amount is reduced so that it equals the terminating value. Note 1: A consequence of the choice is that subsection (7) applies to the asset. Note 2: The amount of the reduction is not re ‑ allocated among other assets. (9) Section 705 ‑ 55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705 ‑ 45 of that Act. Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705 ‑ 40 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 705-310 — Adjustable value of head company’s notional assets

Application (1) If: (a) section 40 ‑ 35, 40 ‑ 37, 40 ‑ 40 or 40 ‑ 43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701 ‑ 5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40 ‑ 35, 40 ‑ 37, 40 ‑ 40 or 40 ‑ 43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; this section affects the adjustable value of the head company’s notional asset. Object (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (a) a deduction for the notional asset reflecting the amount of the expenditure relating to depreciating assets; and (b) a deduction for that amount because of the decline in value of those depreciating assets. Reduction at joining time for expenditure on depreciating assets (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705 ‑ 305(3).

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 707-145 — Certain choices to cancel the transfer of a loss may be revoked

Subsection 707 ‑ 145(3) of the Income Tax Assessment Act 1997 does not apply if: (a) the revocation of the choice mentioned in that subsection takes place before 1 January 2006; and (b) each entity in relation to which the following conditions are satisfied has agreed to the revocation: (i) the entity (the leaving entity ) ceased to be a subsidiary member of the group before the revocation took place; (ii) an asset became that of the leaving entity because section 701 ‑ 1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707 ‑ A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member.

Amendment history: Inserted by No 20 of 2004, effective Schedule 6: 1 July 2000 Remainder: Royal Assent | Amended by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent

s 707-325 — Increasing the available fraction for a bundle of losses by increasing the real loss ‑ maker’s modified market value

Conditions for increasing real loss ‑ maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707 ‑ 320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor ) other than the real loss ‑ maker mentioned in subsection 707 ‑ 315(1) of that Act for the bundle; and (b) both the real loss ‑ maker and the value donor became members of the group mentioned in subsection 707 ‑ 315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (c) the initial transfer time is before 1 July 2004; and (ca) neither the real loss ‑ maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D ‑ 10(1) from being a subsidiary member of a consolidated group; and (d) the bundle includes a loss that is not : (i) an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936 ); or (ii) a loss whose utilisation is affected by section 707 ‑ 350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (i) made the loss for the income year for which the real loss ‑ maker made it; and (ii) not utilised it; and (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (i) section 713 ‑ 535 (Losses of entities whose membership interests are virtual PST assets of life insurance company); (ii) section 713 ‑ 540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (f) the requirement in subsection (2) is met. (2) It must have been possible for the real loss ‑ maker to have transferred the loss to the value donor under Subdivision 170 ‑ A or 170 ‑ B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707 ‑ 328 had the conditions in that section existed. Adding to the modified market value of the real loss ‑ maker (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss ‑ maker at the initial transfer time the amount worked out using the formula: Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707 ‑ 327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss ‑ maker to the transferee. (4) In subsection (3): total of real loss ‑ maker’s Division 170 losses in bundle is the total of the amount of each loss: (a) that is covered by paragraphs (1)(d) and (e); and (b) in relation to which the requirements in subsection (2) are met. total of real loss ‑ maker’s non ‑ foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). Choice to work out available fraction using this section (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707 ‑ 350) losses transferred to it under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 ; and (b) the end of 31 December 2005. Note: For the purposes of paragraph (5)(a), ignore losses to which section 713 ‑ 535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707 ‑ 355 of this Act. (6) The choice cannot be amended, or revoked, after 31 December 2005. If this section applies more than once for the same value donor (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss ‑ makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. Increase in real loss ‑ maker’s value reduces value donor’s value (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). This section does not affect utilisation of overall foreign losses (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936 ) included in a bundle of losses: (a) transferred from the real loss ‑ maker under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 ; or (b) transferred from the value donor under that Subdivision. Note: If a bundle of losses includes an overall foreign loss and a loss of another sort: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable.

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 7–9, Sch 14 (items 16, 19) and Sch 15 (item 2): 24 Oct 2002 (s 2(1) items 1, 2, 4) | Amended by No 20 of 2004, effective Schedule 6: 1 July 2000 Remainder: Royal Assent | Amended by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8) | Amended by No 41 of 2005, effective s. 4, Schedule 2 (items 10, 11), Schedule 6 (items 1, 4, 16, 29–35) and Schedule 10 (items 222, 223, 274): Royal Assent | Amended by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent | Amended by No 143 of 2007, effective Schedule 1 (items 5, 195–205, 222, 225, 226), Schedule 5 (items 18–25, 48(1), (2)) and Schedule 7 (items 97, 98): Royal Assent Sch 1 (item 227): 30 June 2014

s 707-326 — Events involving only value donor and real loss ‑ maker not covered by rule against inflation of modified market value

(1) This section affects the calculation of the modified market value of the real loss ‑ maker mentioned in subsection 707 ‑ 315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707 ‑ 325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936 , in the bundle). Note: This section does not affect the calculation of the real loss ‑ maker’s modified market value for other purposes (such as the real loss ‑ maker being a value donor for the purposes of another application of section 707 ‑ 325 of this Act). (2) Disregard for the purposes of subsection 707 ‑ 325(2) of the Income Tax Assessment Act 1997 an event: (a) that is described in subsection 707 ‑ 325(4) of that Act; and (b) that meets the condition in subsection (3) or (4) of this section. (3) One condition is that the event was an injection of capital directly into the real loss ‑ maker by the value donor mentioned in section 707 ‑ 325 of this Act. (4) The other condition is that the event was a transaction: (a) that did not take place at arm’s length; and (b) that involved only the real loss ‑ maker and the value donor mentioned in section 707 ‑ 325 of this Act; and (c) that would have caused subsection 707 ‑ 325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss ‑ maker’s modified market value (even if no other events described in subsection 707 ‑ 325(4) of that Act had occurred), apart from this section. (5) Subsection (2) of this section does not apply if subsection 707 ‑ 325(2) of the Income Tax Assessment Act 1997 : (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss ‑ maker (whether or not the event also involved either the value donor or the real loss ‑ maker); or (b) would operate for those purposes because of such an event apart from another application of this section.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17) | Amended by No 143 of 2007, effective Schedule 1 (items 5, 195–205, 222, 225, 226), Schedule 5 (items 18–25, 48(1), (2)) and Schedule 7 (items 97, 98): Royal Assent Sch 1 (item 227): 30 June 2014

s 707-327 — Choosing available fraction to apply to value donor’s loss

Conditions for choosing available fraction for value donor’s loss (1) This section has effect for the purposes of working out under Subdivision 707 ‑ C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707 ‑ 325, as if there were added to the modified market value of the real loss ‑ maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (b) the loss was transferred under Subdivision 707 ‑ A of that Act at the initial transfer time from the value donor ; and (c) the loss is not a loss whose utilisation is affected by section 707 ‑ 350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707 ‑ A of that Act at the initial transfer time had the company: (i) made the loss for the income year for which the value donor made it; and (ii) not utilised it; and (e) the requirement in subsection (3) is met. Note: This section has effect even if the amount added to the real loss ‑ maker’s modified market value under section 707 ‑ 325 is nil because the value donor’s modified market value is nil. (2) This subsection covers: (a) the real loss ‑ maker; and (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707 ‑ 325, as if there were added to the real loss ‑ maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170 ‑ A or 170 ‑ B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707 ‑ 328 had the conditions in that section existed. Treating value donor’s loss as included in bundle (4) If the transferee mentioned in subsection 707 ‑ 325(1) chooses, sections 707 ‑ 310, 707 ‑ 335 (except paragraph 707 ‑ 335(2)(a)) and 707 ‑ 340 of the Income Tax Assessment Act 1997 (and subsections 707 ‑ 315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: (a) the bundle of losses included the loss; and (b) the loss was not included in any other bundle of losses. Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. Choice to treat value donor’s loss as included in bundle (5) A choice for the purposes of subsection (4): (a) may be made only by the later of: (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707 ‑ 350) losses transferred to it under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 ; and (ii) the end of 31 December 2005; and (b) cannot be revoked after 31 December 2005. Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713 ‑ 535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707 ‑ 355 of this Act. Loss already in bundle with increased available fraction (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707 ‑ 325(1)(d) and (e) and subsection 707 ‑ 325(2) in an application of section 707 ‑ 325 separate from the application of that section mentioned in paragraph (1)(a) of this section. Note: This means that a loss that provided a basis for section 707 ‑ 325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses.

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 7–9, Sch 14 (items 16, 19) and Sch 15 (item 2): 24 Oct 2002 (s 2(1) items 1, 2, 4) | Amended by No 20 of 2004, effective Schedule 6: 1 July 2000 Remainder: Royal Assent | Amended by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent

s 707-328 — Income year and conditions for possible transfer under Division 170 of the Income Tax Assessment Act 1997

(1) This section sets out the period and conditions referred to: (a) in subsections 707 ‑ 325(2) and 707 ‑ 327(3); and (b) in connection with the requirement that it must have been possible for a company (the notional transferor ) to transfer to another company (the notional transferee ) for an income year a loss under Subdivision 170 ‑ A or 170 ‑ B of the Income Tax Assessment Act 1997 . Period to be treated as income year for transfer (2) The period: (a) starts at the later of these times: (i) the start of the trial year; (ii) the start of the income year for which the loss was made; and (b) ends immediately after the initial transfer time mentioned in subsection 707 ‑ 320(1) of the Income Tax Assessment Act 1997 . Note: For the purposes of identifying the trial year using the definition in section 707 ‑ 120 of the Income Tax Assessment Act 1997 , the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. Conditions (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936 ) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time.

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

s 707-328A — Some events involving only group members not covered by rule against inflation of modified market value

Overview (1) Subsection (3) of this section affects the calculation, under section 707 ‑ 325 of the Income Tax Assessment Act 1997 and section 707 ‑ 325 of this Act, of the modified market value of the real loss ‑ maker mentioned in subsection 707 ‑ 315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707 ‑ 315(1) of that Act in connection with the bundle at the time (the formation time ) the group became a consolidated group; and (b) the provisions described in subsection 707 ‑ 327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707 ‑ 327(1)(b) and (c) of this Act as if the bundle included the loss; and (c) all members of the group at the formation time were companies; and (d) subsection 707 ‑ 325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707 ‑ 325(1) of this Act chooses that this section apply in relation to the real loss ‑ maker. (2) Section 707 ‑ 325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss ‑ maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. Disregarding events for purposes of anti ‑ inflation rule (3) Disregard for the purposes of subsection 707 ‑ 325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707 ‑ 325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or (b) a transaction that involved only entities that became members of the group at the formation time. Note: Disregarding such an event could have a direct or indirect effect on the real loss ‑ maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss ‑ maker’s modified market value calculated under section 707 ‑ 325 of the Income Tax Assessment Act 1997 , if the real loss ‑ maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707 ‑ 325 of this Act to add an amount to the real loss ‑ maker’s modified market value for those purposes. Choice (4) A choice for the purposes of paragraph (1)(e): (a) may be made only by the later of: (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707 ‑ 350) losses transferred to it under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 ; and (ii) the end of 31 December 2005; and (b) cannot be amended, or revoked, after 31 December 2005. Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713 ‑ 535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707 ‑ 355 of this Act. Scope of this section (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss ‑ maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936 ) that: (a) is included in the bundle; or (b) was transferred under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 from an entity other than the real loss ‑ maker. Note: If the bundle includes an overall foreign loss and a loss of another sort: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17) | Amended by No 20 of 2004, effective Schedule 6: 1 July 2000 Remainder: Royal Assent | Amended by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent | Amended by No 143 of 2007, effective Schedule 1 (items 5, 195–205, 222, 225, 226), Schedule 5 (items 18–25, 48(1), (2)) and Schedule 7 (items 97, 98): Royal Assent Sch 1 (item 227): 30 June 2014

s 707-329 — Modified market value at a time before 8 December 2004

Disregard an event that is described in subsection 707 ‑ 325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707 ‑ 325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004.

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

s 707-350 — Alternative loss utilisation regime to Subdivision 707 ‑ C of the Income Tax Assessment Act 1997

(1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss ‑ maker ) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time ) the transferee became the head company of a consolidated group; and (c) they were transferred to the transferee from the real loss ‑ maker because: (i) the real loss ‑ maker met the conditions in section 165 ‑ 12 of that Act; and (ii) the conditions in one or more of paragraphs 165 ‑ 15(1)(a), (b) and (c) did not exist in relation to the real loss ‑ maker; and (d) none of them had been transferred under that Subdivision before the initial transfer time; and (da) the real loss ‑ maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D ‑ 10(1) from being a subsidiary member of a consolidated group; and (e) the transferee has made a choice under subsection (5). Losses to be utilised only after non ‑ transferred losses (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non ‑ transferred losses ) of the same sort that the transferee made without a transfer under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non ‑ transferred losses). Further limit on utilising the losses (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. Limit on utilising the losses Item For this income year: The amount of the losses that the transferee may utilise cannot exceed: 1 The first income year ending after the initial transfer time 1 / 3 of the total of the amounts of the losses that were transferred to the transferee 2 The second income year ending after the initial transfer time The difference between: (a) 2 / 3 of the total of the amounts of the losses that were transferred to the transferee; and (b) the amount of the losses utilised for the income year mentioned in item 1 3 The third income year ending after the initial transfer time, or a later income year The difference between: (a) the total of the amounts of the losses that were transferred to the transferee; and (b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time Subdivision 707 ‑ C of Income Tax Assessment Act 1997 disapplied (4) Subdivision 707 ‑ C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707 ‑ A of that Act. Note: This has 2 effects. First, Subdivision 707 ‑ C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707 ‑ A of that Act). Making choice (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and (b) the end of 31 December 2005. Note: For the purposes of paragraph (5)(a), ignore losses to which section 713 ‑ 535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707 ‑ 355 of this Act. When choice has effect (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). Future transfer of the losses not affected (7) This section does not limit the transfer under Subdivision 707 ‑ A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company.

Amendment history: Inserted by No 68 of 2002, effective 24 Oct 2002 ( see s. 2) | Amended by No 20 of 2004, effective Schedule 6: 1 July 2000 Remainder: Royal Assent | Amended by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8) | Amended by No 41 of 2005, effective s. 4, Schedule 2 (items 10, 11), Schedule 6 (items 1, 4, 16, 29–35) and Schedule 10 (items 222, 223, 274): Royal Assent | Amended by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent

s 707-355 — Ignore certain losses in working out when a choice can be made under this Subdivision

In working out when a choice may be made under subsection 707 ‑ 325(5), 707 ‑ 327(5), 707 ‑ 328A(4) or 707 ‑ 350(5), ignore losses to which section 713 ‑ 535 of the Income Tax Assessment Act 1997 applies. Note: That section deals with losses transferred under Subdivision 707 ‑ A of that Act from certain wholly ‑ owned subsidiaries of life insurance companies that are members of a consolidated group.

Amendment history: Inserted by No 41 of 2005, effective s. 4, Schedule 2 (items 10, 11), Schedule 6 (items 1, 4, 16, 29–35) and Schedule 10 (items 222, 223, 274): Royal Assent

s 707-405 — Special rules about losses referable to part of income year

Section 707 ‑ 405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act.

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

s 709-200 — Application of Subdivision 709 ‑ D of the Income Tax Assessment Act 1997

Subdivision 709 ‑ D of the Income Tax Assessment Act 1997 applies on and after 1 July 2002.

Amendment history: Inserted by No 41 of 2005, effective s. 4, Schedule 2 (items 10, 11), Schedule 6 (items 1, 4, 16, 29–35) and Schedule 10 (items 222, 223, 274): Royal Assent

s 712-305 — Reducing adjustable value of head company’s notional asset

(1) This section reduces the adjustable value of a notional asset that section 40 ‑ 35, 40 ‑ 37, 40 ‑ 38, 40 ‑ 40 or 40 ‑ 43 treats the head company of a consolidated group as holding, if: (a) an entity (the leaving entity ) ceases to be a subsidiary member of the group at a time (the leaving time ); and (b) that section treats the leaving entity as holding a notional asset because of section 701 ‑ 40 (Exit history rule) of the Income Tax Assessment Act 1997 . Note: Section 701 ‑ 40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time.

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 713-500 — Object of Subdivision

The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-505 — When this Subdivision applies (first case)

(1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event ) happening involving an entity (the originating entity ) and another entity (the recipient entity ) if: (a) the event occurs in connection with a life insurance company (the member life insurance company ) becoming a member of a consolidated group; and (b) the relevant conditions in section 713 ‑ 520 are met. (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset ) where, apart from this Subdivision, the happening of the event would have resulted in: (a) an amount (other than a capital gain) being included in the originating entity’s assessable income; or (b) the originating entity making a capital gain. (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset ) where, apart from this Subdivision, the happening of the event would have resulted in: (a) an amount (other than a capital gain) being included in the net income of the trust; or (b) the trustee making a capital gain. (4) The CGT events are: (a) CGT events A1, B1, D1, D2, D3, E2, F1 and F2; and (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest ) in a company or in another trust.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-510 — When this Subdivision applies (second case)

(1) This Subdivision also provides for a deferral of the taxation consequences that would occur if: (a) a life insurance company transfers an asset (also the original asset ) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320 ‑ 200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset ) to its segregated exempt assets where, apart from this Subdivision, section 320 ‑ 255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event ) is made in connection with the life insurance company (also the member life insurance company ) becoming a member of a consolidated group. (2) The relevant conditions in section 713 ‑ 520 must be met.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-515 — Entities must choose the relief

(1) This Subdivision applies only if the originating entity (for a section 713 ‑ 505 case) or the life insurance company (for a section 713 ‑ 510 case) chooses that it apply. (2) The choice must be made: (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (b) within a further time allowed by the Commissioner.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-520 — Conditions

(1) For a section 713 ‑ 505 case: (a) the originating entity must be: (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713 ‑ 510 of the Income Tax Assessment Act 1997 ; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713 ‑ 510 of the Income Tax Assessment Act 1997 ; and (c) any asset transferred by the originating entity must be transferred to the recipient entity at its transfer value. (2) For both a section 713 ‑ 505 case and a section 713 ‑ 510 case: (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (3) Any transfer of an asset under the deferral event must happen on or before the later of: (a) 30 June 2004; and (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-525 — Time of transfer

This Act, and the Income Tax Assessment Act 1997 , apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-530 — What the relief is

(1) For a section 713 ‑ 505 case: (a) if the originating entity is a company: (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount ) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain ) that the originating entity would have made as a result of the deferral event is disregarded; and (b) if the originating entity is a trust: (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount ) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain ) that the member life insurance company would have made as a result of the deferral event is disregarded. (2) For a section 713 ‑ 510 case: (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount ) under paragraph 320 ‑ 15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain ) that the member life insurance company would have made as a result of the deferral event is disregarded.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-535 — Subsequent consequences

(1) This section operates if, after the deferral event happens, another event (the new event ) happens where the new event is: (a) a CGT event happening to: (i) the original asset; or (ii) if the deferral event was CGT event C2—the replacement asset; or (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (c) if the recipient entity is a life insurance company: (i) the original asset being transferred to or from the company’s virtual PST under section 320 ‑ 180, 320 ‑ 185 or 320 ‑ 195 of the Income Tax Assessment Act 1997 ; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320 ‑ 235, 320 ‑ 240 or 320 ‑ 250 of that Act; or (d) if the originating entity is a company—the originating entity ceasing to exist. (2) For a section 713 ‑ 505 case where the originating entity is a company: (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (3) For a section 713 ‑ 505 case where the originating entity is a trust: (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713 ‑ 505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320 ‑ 205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (5) For a section 713 ‑ 510 case: (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320 ‑ 205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-540 — Requirement to notify happening of new event

(1) For a section 713 ‑ 505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. (2) Subsection (1) does not apply if the new event is the originating entity ceasing to exist.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-545 — Discount capital gain in certain cases

The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713 ‑ 535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) the asset to which the deferral event happened is a virtual PST asset; and (b) the asset was acquired less than 12 months before the deferral event happened; and (c) the new event happens at least 12 months after the asset was acquired.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 713-700 — Application

Subdivision 713 ‑ M of the Income Tax Assessment Act 1997 applies on and after 1 July 2002.

Amendment history: Inserted by No 41 of 2005, effective s. 4, Schedule 2 (items 10, 11), Schedule 6 (items 1, 4, 16, 29–35) and Schedule 10 (items 222, 223, 274): Royal Assent

s 715-380 — Exit history rule not to affect certain matters related to Division 230 financial arrangements

Transitional balancing adjustments (1) Subsection (2) applies if: (a) an entity (the leaving entity ) ceases to be a subsidiary member of a consolidated group at a time (the leaving time ); and (b) but for the cessation of membership and section 701 ‑ 40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701 ‑ 40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time.

Amendment history: Inserted by No 15 of 2009, effective Schedule 1 (items 98, 99): Royal Assent

s 715-658 — Application

Subdivision 715 ‑ J of the Income Tax Assessment Act 1997 applies on and after 1 July 2002.

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 715-659 — Extension of time for making choice if joining time was before commencement

(1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (a) subsection 715 ‑ 660(4); (b) subsection 715 ‑ 665(5); (c) paragraph 715 ‑ 675(1)(c). (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision.

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 715-698 — Application

Subdivision 715 ‑ K of the Income Tax Assessment Act 1997 applies on and after 1 July 2002.

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 715-699 — Extension of time for making choice if leaving time was before commencement

(1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (a) subsection 715 ‑ 700(5); (b) subsection 715 ‑ 705(6). (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision.

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 716-340 — Expenditure incurred before 1 July 2001 and allocated to a software pool

Sections 716 ‑ 340 and 716 ‑ 345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. Extended operation of sections of the Income Tax Assessment Act 1997 Column 1 Sections 716 ‑ 340 and 716 ‑ 345 of the Income Tax Assessment Act 1997 operate in relation to: Column 2 In the same way as they operate in relation to: 1 Former section 46 ‑ 90 of that Act Section 40 ‑ 455 of that Act 2 A software pool created under former Subdivision 46 ‑ D of that Act A software development pool 3 Expenditure in a software pool under former Subdivision 46 ‑ D of that Act Expenditure allocated to a software development pool 4 Software, expenditure on which was in a software pool under former Subdivision 46 ‑ D of that Act In ‑ house software, expenditure on the development of which is allocated to a software development pool

Amendment history: Inserted by No 23 of 2005, effective Schedule 1 (items 1, 9, 10, 12, 20, 25, 28), Schedule 2 (item 12) and Schedule 12 (item 11): Royal Assent Schedule 12 (items 7, 8, 10): 1 July 2000 Schedule 12 (item 9): 1 July 2001

s 719-2 — Modified application of Part 3 ‑ 90 to MEC groups

(1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) However, that effect is subject to the modifications set out in this Division. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: (a) Division 703 of this Act; or (b) Division 703 of the Income Tax Assessment Act 1997 ; applies as if it referred instead to the corresponding provision in: (c) Division 719 of this Act; or (d) Division 719 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17) | Amended by No 67 of 2003, effective Sch 5 (items 4–10), Sch 6 and 7: 24 Oct 2002 (s 2(1) item 3) Sch 10 (item 24): 30 June 2003 (s 2(1) item 10) | Amended by No 107 of 2003, effective Schedule 2 (items 6, 13, 14, 35–37, 40) and Schedule 7 (item 10): Royal Assent

s 719-5 — Debt interests that are not membership interests

Section 703 ‑ 30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 719-10 — Effect of Division 701C

(1) This section applies if the consolidated group mentioned in section 701C ‑ 10 or 701C ‑ 15 is a MEC group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004.

Amendment history: Inserted by No 67 of 2003, effective Sch 5 (items 4–10), Sch 6 and 7: 24 Oct 2002 (s 2(1) item 3) Sch 10 (item 24): 30 June 2003 (s 2(1) item 10)

s 719-15 — Modified effect of subsection 701D ‑ 10(2)

(1) This section applies if the group mentioned in subsection 701D ‑ 10(2) of this Act is a MEC group. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time ) a wholly ‑ owned subsidiary of the entity that became the head company of the group (the head entity ), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier ‑ 1 company of the group at the formation time.

Amendment history: Inserted by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8)

s 719-30 — Employee share schemes

Despite the amendment of section 719 ‑ 30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009 , subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement.

Amendment history: Inserted by No 133 of 2009, effective Schedule 1 (items 77, 83–87) and Schedule 2 (items 14, 15(b)): 14 Dec 2009

s 719-160 — Transitional cost setting rules on joining have effect with modifications

(1) Section 719 ‑ 160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719 ‑ 160(3) of the Income Tax Assessment Act 1997 . (2) The provisions are Divisions 701, 701A and 702 of this Act, other than: (a) section 701 ‑ 5; and (b) section 701 ‑ 40; and (c) section 701 ‑ 45. (3) However, that effect of section 719 ‑ 160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division.

Amendment history: Inserted by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11) | Amended by No 107 of 2003, effective Schedule 2 (items 6, 13, 14, 35–37, 40) and Schedule 7 (item 10): Royal Assent

s 719-161 — Modified effect of section 701 ‑ 1

(1) This section applies if a consolidated group mentioned in section 701 ‑ 1 of this Act is a MEC group. (2) Paragraphs 701 ‑ 1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier ‑ 1 company at the time the MEC group came into existence. (3) An entity is a transitional entity for the purposes of paragraph 701 ‑ 1(3)(b) of this Act if: (a) the entity and one or more other entities were members of a potential MEC group as eligible tier ‑ 1 companies, throughout the period: (i) beginning just before 1 July 2003; and (ii) ending just before a time (the rolldown time ) before the MEC group came into existence; and Note: The other entity (or one of the other entities) could be the future head company. (b) the entity satisfied either of these conditions at the rolldown time: (i) the entity was a wholly ‑ owned subsidiary of any of those other entities; (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (i) beginning just after the rolldown time; and (ii) ending when the MEC group came into existence; and (d) the other entities remained members of the potential MEC group as eligible tier ‑ 1 companies, throughout the period: (i) beginning just before 1 July 2003; and (ii) ending when the MEC group came into existence; and (e) the other entities were members of the MEC group when it came into existence, as eligible tier ‑ 1 companies.

Amendment history: Inserted by No 83 of 2004, effective Sch 1 (items 80–83): 30 June 2000 (s 2(1) item 2) Sch 2 (items 1, 19, 34, 75, 76): 25 June 2004 (s 2(1) items 13, 16) Sch 2 (item 9): 24 Oct 2002 (s 2(1) item 15)

s 719-163 — Modified effect of section 701 ‑ 35

(1) This section applies if the transitional group mentioned in section 701 ‑ 35 of this Act is a MEC group. (2) That section has effect as if paragraph 701 ‑ 35(3)(c) were repealed and the following paragraph were substituted: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (i) a transitional foreign ‑ held subsidiary of the group (see section 701C ‑ 20); or (ii) an eligible tier ‑ 1 company of the group.

Amendment history: Inserted by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 719-165 — Modified effect of paragraph 701 ‑ 45(1)(b)

(1) This section applies if the transitional group mentioned in paragraph 701 ‑ 45(1)(b) of this Act is a MEC group. (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier ‑ 1 company, at the time the transitional group came into existence.

Amendment history: Inserted by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11)

s 719-305 — Available fraction for bundle of losses not affected by concessional rules

To avoid doubt, sections 707 ‑ 325 and 707 ‑ 327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719 ‑ 305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707 ‑ A of that Act.

Amendment history: Inserted by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11)

s 719-310 — Certain choices may be revoked

Subsection 719 ‑ 325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006.

Amendment history: Inserted by No 20 of 2004, effective Schedule 6: 1 July 2000 Remainder: Royal Assent | Amended by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent

s 719-450 — Application of Subdivision 719 ‑ I of the Income Tax Assessment Act 1997

Subdivision 719 ‑ I of the Income Tax Assessment Act 1997 applies on and after 1 July 2002.

Amendment history: Inserted by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent

s 721-25 — References in tax sharing agreements to former table item 25

(1) A reference in an agreement to item 25 of the table in subsection 721 ‑ 10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (a) paragraph 721 ‑ 25(1)(a) of that Act applies to the agreement; and (b) the agreement was in force just before the commencement of this section. (2) This section applies in relation to tax to which Division 5 of the Income Tax Assessment Act 1997 applies.

Amendment history: Inserted by No 79 of 2010, effective Sch 1 (items 33, 54, 55), Sch 2 (item 9), Sch 3 (item 60) and Sch 4 (item 50): 1 July 2010 (s 2(1) items 2–4)

s 723-1 — Application of Division 723

(1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: (a) is not a depreciating asset; or (b) is an item of trading stock; or (c) is a revenue asset. (2) Paragraph 723 ‑ 10(1)(b) or 723 ‑ 15(1)(b) applies to a right created on or after 1 July 2002.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 7–9, Sch 14 (items 16, 19) and Sch 15 (item 2): 24 Oct 2002 (s 2(1) items 1, 2, 4) | Amended by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 725-1 — Application of Division 725

Division 725 applies to a scheme entered into on or after 1 July 2002. It also applies to a scheme entered into on or after 27 June 2002, but only if: (a) the decrease times for down interests of which entities are affected owners are all on or after 1 July 2002; and (b) the increase times for up interests of which entities are affected owners are all on or after 1 July 2002.

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 7–9, Sch 14 (items 16, 19) and Sch 15 (item 2): 24 Oct 2002 (s 2(1) items 1, 2, 4)

s 727-1 — Application of Division 727

(1) Division 727, as inserted by the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 and amended by the New Business Tax System (Consolidation and Other Measures) Act 2003 , applies to a scheme entered into on or after 1 July 2002. (2) It also applies to a scheme entered into on or after 27 June 2002, but only in relation to: (a) an indirect value shift that happens under the scheme on or after 1 July 2002; or (b) a presumed indirect value shift that happens under the scheme and affects a realisation event that happens on or after 1 July 2002. (3) Subsection (2) does not apply to an indirect value shift, or a presumed indirect value shift, if: (a) the economic benefits taken into account in determining that the scheme has resulted in that indirect value shift or presumed indirect value shift include economic benefits provided by: (i) an act referred to in Division 138 of the Income Tax Assessment Act 1997 as the trigger event; or (ii) an event or act referred to in Division 139 of the Income Tax Assessment Act 1997 as the trigger event; and (b) the act was done, or the event happened, on or after 27 June 2002 and before 1 July 2002. Note: In that case, the consequences of the trigger event are worked out under Division 138 or 139 of the Income Tax Assessment Act 1997 : see items 13 and 14 of Schedule 15 to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 .

Amendment history: Inserted by No 90 of 2002, effective s 4, Sch 7–9, Sch 14 (items 16, 19) and Sch 15 (item 2): 24 Oct 2002 (s 2(1) items 1, 2, 4) | Amended by No 16 of 2003, effective Sch 1 (items 7, 8, 27–36), Sch 6 (item 10), Sch 11 (item 4), Sch 15, Sch 16 (items 4, 5), Sch 17 and Sch 19 (items 4, 5): 24 Oct 2002 (s 2(1) items 1A ‑ 1C, 2, 4, 7, 10) Sch 25 (items 11, 12), Sch 26 (items 5–8), Sch 27 (item 20) and Sch 28 (item 13): 29 June 2002 (s 2(1) items 15, 17)

s 727-230 — Transitional exclusion for certain indirect value shifts relating mainly to services

(1) An indirect value shift does not have consequences under Division 727 of the Income Tax Assessment Act 1997 if, to the extent of at least 95% of their total market value, the greater benefits consist entirely of: (a) a right to have services that are covered by section 727 ‑ 240 of that Act provided directly by the losing entity to the gaining entity; or (b) services that are covered by that section and have been, are being, or are to be, so provided; or both, and the IVS time for the scheme that results in the indirect value shift is before: (c) unless paragraph (d) applies—the start of the losing entity’s 2003 ‑ 2004 income year; or (d) if the losing entity’s 2002 ‑ 2003 income year ends before 30 June 2003—the start of the losing entity’s 2004 ‑ 2005 income year. How subsection (1) applies to a presumed indirect value shift (2) For the purposes of section 727 ‑ 850 (about a presumed indirect value shift affecting a realisation event) of the Income Tax Assessment Act 1997 , subsection (1) of this section applies to the presumed indirect value shift: (a) on the assumptions set out in subsection 727 ‑ 865(3) of that Act; and (b) as if the exclusion in subsection (1) of this section were an exclusion in Subdivision 727 ‑ C of that Act.

Amendment history: Inserted by No 20 of 2004, effective Schedule 6: 1 July 2000 Remainder: Royal Assent

s 727-470 — Affected interests do not include equity or loan interests owned by entity that is eligible to be an STS taxpayer

(1) This section applies to an indirect value shift if: (a) the indirect value shift happens in the 2007 ‑ 08 income year or a later income year; and (b) the scheme that results in the indirect value shift was entered into before the start of the 2007 ‑ 08 income year. (2) Paragraph 727 ‑ 470(2)(a) of the Income Tax Assessment Act 1997 (as in force immediately before the commencement of this section) continues to have effect in relation to the indirect value shift as if the repeals and amendments made by Schedule 1, Parts 1 and 2 of Schedule 3 and Schedule 8 to the Tax Laws Amendment (Small Business) Act 2007 had not been made.

Amendment history: Inserted by No 80 of 2007, effective 21 June 2007

s 815-1 — Application of Subdivision 815 ‑ A of the Income Tax Assessment Act 1997

(1) Subdivision 815 ‑ A of the Income Tax Assessment Act 1997 applies to income years starting on or after 1 July 2004. (2) However, Subdivision 815 ‑ A does not apply to an income year to which Subdivisions 815 ‑ B and 815 ‑ C of that Act apply. Note: For the income years to which Subdivisions 815 ‑ B and 815 ‑ C apply, see section 815 ‑ 15 of this Act.

Amendment history: Inserted by No 115 of 2012, effective Schedule 1 (item 12): Royal Assent | Amended by No 101 of 2013, effective Sch 2 (items 51–54): Royal Assent

s 815-5 — Cross ‑ border transfer pricing guidance

Despite section 815 ‑ 20 of the Income Tax Assessment Act 1997 , the documents covered by that section for an income year that starts before 1 July 2012 are taken to be as follows: (a) the Model Tax Convention on Income and on Capital, and its Commentaries, as adopted by the Council of the Organisation for Economic Cooperation and Development and last amended before the start of the income year; (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as approved by that Council and last amended before the start of the income year.

Amendment history: Inserted by No 115 of 2012, effective Schedule 1 (item 12): Royal Assent

s 815-10 — Scheme penalty applies in pre ‑ commencement period as if only the old law applied

(1) This section applies if: (a) a determination under subsection 815 ‑ 30(1) of the Income Tax Assessment Act 1997 has effect in relation to an entity in an income year; and (b) the income year starts before 1 July 2012. (2) Subdivision 284 ‑ C in Schedule 1 to the Taxation Administration Act 1953 applies in relation to the entity and the income year as if: (a) Subdivision 815 ‑ A of the Income Tax Assessment Act 1997 had not been enacted; and (b) each other provision of a taxation law applied in relation to the entity in the way it would have if that Subdivision had not been enacted.

Amendment history: Inserted by No 115 of 2012, effective Schedule 1 (item 12): Royal Assent

s 815-15 — Application of Subdivisions 815 ‑ B, 815 ‑ C and 815 ‑ D of the Income Tax Assessment Act 1997

(1) Subdivisions 815 ‑ B, 815 ‑ C and 815 ‑ D of the Income Tax Assessment Act 1997 apply: (a) in respect of tax other than withholding tax—in relation to income years starting on or after the date mentioned in subsection (2); and (b) in respect of withholding tax—in relation to income derived, or taken to be derived, in income years starting on or after that date. Start date for transfer pricing amendments (2) The date is the earlier of: (a) 1 July 2013; and (b) the day the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013 receives the Royal Assent.

Amendment history: Inserted by No 101 of 2013, effective Sch 2 (items 51–54): Royal Assent

s 820-10 — Application of Division 820 of the Income Tax Assessment Act 1997

(1) Subject to this section, Division 820 of the Income Tax Assessment Act 1997 applies in relation to an income year that begins on or after 1 July 2001. (1A) Subdivisions 820 ‑ FA and 820 ‑ FB of that Act apply on and after 1 July 2002. (2) Subdivision 820 ‑ L of that Act, to the extent that it relates to the requirements under section 820 ‑ 960 of that Act, applies only in relation to an income year that begins on or after 1 July 2002.

Amendment history: Inserted by No 162 of 2001, effective Sch 1 (items 20–22): 1 July 2001 (s 2(1)) | Amended by No 117 of 2002, effective Sch 3 (item 8), Sch 5 (items 13, 14), Sch 9, Sch 10, Sch 12 (items 24–28), Sch 13 (items 15, 16) and Sch 15 (item 1): 24 Oct 2002 (s 2(1) items 4, 7–9) Sch 18: 29 June 2002 (s 2(1) item 11)

s 820-12 — Application of Division 974 of the Income Tax Assessment Act 1997 for the purposes of Division 820 of that Act

(1) Division 974 of the Income Tax Assessment Act 1997 applies for the purposes of determining whether, for the purposes of Division 820 of that Act, an interest is a debt interest or an equity interest at any time on or after 1 July 2001 (whether or not the debt and equity test amendments apply to transactions in relation to that interest at that time). (2) In this section, debt and equity test amendments has the same meaning as in Part 4 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001 .

Amendment history: Inserted by No 162 of 2001, effective Sch 1 (items 20–22): 1 July 2001 (s 2(1))

s 820-45 — Transitional provision—accounting standards and prudential standards

(1) This section applies to 4 consecutive income years of an entity beginning on or after 1 January 2005. (2) Subject to subsection (3), the entity may choose, for any or all of those income years, to use the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 (rather than the current accounting standards) for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997 . Note 1: Making the choice for an income year does not require the entity to maintain a full set of accounts based on those old accounting standards. Note 2: The choice is only for the purposes of calculating amounts for the purposes of the thin capitalisation regime. (3) If the entity makes a choice under subsection (2) for an income year but an associate entity of that entity does not, the entity may, in working out its associate entity excess amount so far as it relates to that associate entity at a time in that year, use either the accounting standards in force under the Corporations Act 2001 immediately before 1 January 2005 or the current accounting standards. (4) If an ADI makes a choice under subsection (2) for an income year, the ADI must also choose to use for that year the prudential standards in force under the Banking Act 1959 immediately before 1 January 2005 (rather than the current prudential standards) for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997 . Note 1: Making the choice for an income year does not require the entity to maintain capital adequacy calculations based on those old prudential standards. Note 2: The choice is only for the purposes of calculating amounts for the purposes of the thin capitalisation regime. (5) For an income year for which an entity does not make a choice under subsection (2), the current accounting standards will be used for the purpose of calculating amounts applicable to the entity under Division 820 of the Income Tax Assessment Act 1997 . (6) For an income year for which an ADI does not make a choice under subsection (2), the current prudential standards will be used for the purpose of calculating amounts applicable to the ADI under Division 820 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 162 of 2005, effective Schedule 3 (items 20–33) and Schedule 4: Royal Assent | Amended by No 79 of 2007, effective Sch 2: 15 Mar 2007 (s 2(1) item 3) Sch 5: 21 June 2007 (s 2(1) item 4)

s 830-1 — Standard application

Foreign hybrids (1) Division 830 of the Income Tax Assessment Act 1997 applies to assessments for the 2003 ‑ 2004 income year, and each later income year, of a taxpayer who will as a result be a partner in an entity that is a foreign hybrid in relation to that income year. CFCs that are, directly or indirectly, partners in foreign hybrids (2) Division 830 of the Income Tax Assessment Act 1997 applies for the purpose of working out the attributable income, in relation to an attributable taxpayer, for: (a) the statutory accounting period that starts on 1 July 2003 or on the day on which, as a result of an election under subsection 319(2) of the Income Tax Assessment Act 1936 , the statutory accounting period that would otherwise start on 1 July 2003 starts; and (b) each later statutory accounting period; of a CFC that: (c) will as a result be a partner in an entity that is a foreign hybrid in relation to that statutory accounting period; or (d) has, directly or indirectly through one or more other entities, an interest in another entity that will, as a result, be a foreign hybrid in relation to that statutory accounting period.

Amendment history: Inserted by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8)

s 830-15 — Modified version of income tax law to apply for certain past income years

Basic rule (1) Subject to subsection (3), if: (a) an income year (the past income year ) of a taxpayer started before: (i) if section 830 ‑ 5 of this Act does not apply to the taxpayer—the 2003 ‑ 2004 income year; or (ii) if that section applies to the taxpayer—the 2002 ‑ 2003 income year; and (b) either: (i) a statutory accounting period of a CFC, in relation to which the taxpayer was an attributable taxpayer at the end of that period and had an attribution percentage greater than nil, ended in the past income year; or (ii) the taxpayer had an interest in a FIF at the end of the past income year; and (c) the CFC or FIF would have been a foreign hybrid in relation to the past income year under: (i) section 830 ‑ 10 of the Income Tax Assessment Act 1997 (disregarding paragraph (1)(e) of that section); or (ii) section 830 ‑ 15 of that Act (disregarding paragraph (1)(d) and subsection (3) of that section); if that section had been in force in the past income year; then, for the purposes mentioned in subsection (2) of this section, the Income Tax Assessment Act 1936 applies with the modifications set out in section 830 ‑ 20 of this Act in working out: (d) the attributable income of the CFC for the statutory accounting period that ended in the past income year; or (e) the notional income of the FIF for the notional accounting period that ends in the past income year. Purposes (2) The purposes are: (a) any amendment of an assessment of the taxpayer for the past income year made before the commencement of this section; and (b) the making of an assessment of the taxpayer for the past income year between the commencement of this section and the end of 30 June 2004; and (c) any amendment of such an assessment; and (d) the making of any assessment of the taxpayer for the past income year that takes place after 30 June 2004 and before the end of the time within which, if that assessment had been made on 1 July 2004, the Commissioner could amend the assessment under paragraph 170(2)(b), (c) or (d) of the Income Tax Assessment Act 1936 (as in force before the day on which the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 received the Royal Assent); and (e) any amendment of such an assessment. Exception (3) If: (a) apart from this subsection, subsection (1) would apply to a taxpayer in relation to a CFC for a past income year; and (b) before the commencement of this section, the taxpayer lodged its income tax return for the past income year; and (c) the taxpayer prepared the income tax return on the basis that, for the purposes of Part X of the Income Tax Assessment Act 1936 , the CFC was a resident of no particular unlisted country; then subsection (1) does not apply to the taxpayer in relation to the CFC for the past income year unless: (d) if there is only one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for the past income year; or (e) if there is more than one past income year to which paragraphs (a) to (c) of this subsection apply—the taxpayer elects that the subsection applies for all of those past income years. (4) The taxpayer must make the election: (a) on or before the day on which the taxpayer lodges its income tax return for the 2003 ‑ 2004 income year; or (b) within a further time allowed by the Commissioner. (5) The election is irrevocable.

Amendment history: Inserted by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8) | Amended by No 161 of 2005, effective Schedule 1 (item 74): Royal Assent

s 830-20 — Modifications of income tax law

(1) This section sets out the modifications of the Income Tax Assessment Act 1936 that, if section 830 ‑ 15 of this Act so provides, apply in working out for a taxpayer: (a) the attributable income of a CFC for the statutory accounting period that ended in an income year; or (b) the notional income of a FIF for the notional accounting period that ended in an income year. CFC—residence (2) If the CFC is not a resident of a particular listed country or a particular unlisted country for the purposes of Part X of the Income Tax Assessment Act 1936 (including after applying section 331 of that Act), then for the purposes of that Part, the CFC is taken to be a resident of the country under whose laws it was formed. CFC—foreign tax paid by taxpayer (3) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936 , if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax ) on its interest in an amount included in the notional assessable income of the CFC for the statutory accounting period, then the CFC is taken to have paid foreign tax (within the meaning of that Act) in respect of the amount equal to the actual foreign tax divided by the taxpayer’s direct attribution interest in the CFC at the end of the statutory accounting period. CFC—foreign tax paid by another CFC (4) For the purpose of subsection 393(1) of the Income Tax Assessment Act 1936 , if: (a) on the assumption in paragraph 830 ‑ 15(1)(c) of this Act, another CFC (the tracing CFC ) would have been a partner in the foreign entity that the CFC mentioned in subsection (1) of this section (the foreign hybrid CFC ) would have been; and (b) the taxpayer had an attribution tracing interest in the tracing CFC that was taken into account in calculating the taxpayer’s attribution percentage for the foreign hybrid CFC at the end of the statutory accounting period; and (c) the tracing CFC paid foreign tax (within the meaning of that Act) (the actual foreign tax ) on its interest in an amount included in the notional assessable income of the foreign hybrid CFC for the statutory accounting period; then the foreign hybrid CFC is taken to have paid foreign tax, (within the meaning of that Act) in respect of the amount included in its notional assessable income, equal to the actual foreign tax divided by the tracing CFC’s direct attribution interest in the foreign hybrid CFC at the end of the statutory accounting period. FIF—foreign tax paid by taxpayer (5) For the purpose of section 573 of the Income Tax Assessment Act 1936 , if the taxpayer paid foreign tax (within the meaning of that Act) (the actual foreign tax ) on its interest in an amount included in the notional income of the FIF for the notional accounting period, then the FIF is taken to have paid foreign tax (within the meaning of that Act) in respect of that amount equal to the actual foreign tax divided by the attribution percentage applicable under section 581 of that Act to the taxpayer in respect of the taxpayer’s interests in the FIF at the end of the notional accounting period.

Amendment history: Inserted by No 101 of 2004, effective s 4, Sch 10 (item 38) and Sch 11 (item 154): 30 June 2004 (s 2(1) items 1, 10, 17) Sch 5: 24 Oct 2002 (s 2(1) item 6) Sch 7 (item 9): 30 June 2003 (s 2(1) item 8) | Amended by No 143 of 2007, effective Schedule 1 (items 5, 195–205, 222, 225, 226), Schedule 5 (items 18–25, 48(1), (2)) and Schedule 7 (items 97, 98): Royal Assent Sch 1 (item 227): 30 June 2014

s 832-10 — Application of Division 832 of the Income Tax Assessment Act 1997 (other than imported hybrid mismatch rule)

(1) The Subdivisions of Division 832 of the Income Tax Assessment Act 1997 covered by subsection (2) apply to assessments for income years starting on or after 1 January 2019. (2) The Subdivisions are as follows: (a) Subdivision 832 ‑ C (Hybrid financial instrument mismatch); (b) Subdivision 832 ‑ D (Hybrid payer mismatch); (c) Subdivision 832 ‑ E (Reverse hybrid mismatch); (d) Subdivision 832 ‑ F (Branch hybrid mismatch); (e) Subdivision 832 ‑ G (Deducting hybrid mismatch); (f) Subdivision 832 ‑ J (Integrity rule).

Amendment history: Inserted by No 84 of 2018, effective sch 1 (item 14): 1 Oct 2018 (s 2(1) item 1)

s 832-15 — Application of imported hybrid mismatch rule

(1) Subdivision 832 ‑ H (Imported hybrid mismatch) of the Income Tax Assessment Act 1997 applies to assessments for income years starting on or after 1 January 2019. (2) However, in applying Subdivision 832 ‑ H to assessments for income years starting before 1 January 2020, items 2 and 3 of the table in subsection 832 ‑ 615(2) are to be disregarded. (3) Despite subsection (1), Subdivision 832 ‑ H does not apply in relation to an offshore hybrid mismatch unless a deduction component of the mismatch arose in a foreign tax period that ends in an income year starting on or after 1 January 2019. (4) In determining whether subsection (3) is satisfied in relation to an offshore hybrid mismatch, disregard section 832 ‑ 635 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 84 of 2018, effective sch 1 (item 14): 1 Oct 2018 (s 2(1) item 1)

s 840-805 — Managed investment trust amounts

(1) This section has effect for amounts represented by or reasonably attributable to fund payments made in relation to the first income year starting on or after the first 1 July after the day on which the Tax Laws Amendment (Election Commitments No. 1) Act 2008 receives the Royal Assent by a trust that is a managed investment trust in relation to that year. (2) If you are a resident of an information exchange country, subsection 840 ‑ 805(1) of the Income Tax Assessment Act 1997 does not apply to the amounts to the extent that it would otherwise apply to you. (3) An entity is a resident of an information exchange country if: (a) the entity is a resident of that country for the purposes of the taxation laws of that country; or (b) if there are no taxation laws of that country applicable to the entity or the entity’s residency status cannot be determined under those laws: (i) for an individual—the individual is ordinarily resident in that country; or (ii) for another entity—the entity is incorporated or formed in that country and is carrying on a business in that country. (4) Instead, you are liable to pay income tax on the amounts (reduced as mentioned in subsection (5)) at the rate declared by the Parliament. Note: The tax is imposed by the Income Tax (Managed Investment Trust Transitional) Act 2008 . (5) The amounts are reduced by any loss or outgoing of yours to the extent that: (a) it is incurred in gaining or producing the amounts; or (b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing the amounts.

Amendment history: Inserted by No 32 of 2008, effective Schedule 1 (items 23, 58): Royal Assent

s 840-810 — Payment of tax under section 840 ‑ 805

(1) Income tax under section 840 ‑ 805 is due and payable by you at the end of 21 days after: (a) if subsection 840 ‑ 805(2) or (3) of the Income Tax Assessment Act 1997 would apply to you apart from section 840 ‑ 805 of this Act—the end of the month in which the relevant amount is paid, applied or dealt with; or (b) if subsection 840 ‑ 805(4) of that Act would so apply to you—the end of the month in which you become presently entitled to the relevant amount. (2) Subsections 840 ‑ 810(2) to (5) of the Income Tax Assessment Act 1997 apply to income tax payable under this section.

Amendment history: Inserted by No 32 of 2008, effective Schedule 1 (items 23, 58): Royal Assent

s 840-905 — Application of Subdivision 840 ‑ S of the Income Tax Assessment Act 1997

Subdivision 840 ‑ S of the Income Tax Assessment Act 1997 applies to income derived on or after 1 July 2012.

Amendment history: Inserted by No 58 of 2012, effective Sch 1 (item 7): 21 June 2012 (s 2(1))

s 842-207 — Application of replacement version of Subdivision 842 ‑ I

(1) The new Subdivision 842 ‑ I applies, or is taken to have applied, in relation to: (a) the 2015 ‑ 16 income year and later income years; and (b) if an entity chooses to apply the new Subdivision 842 ‑ I in relation to the 2011 ‑ 12, 2012 ‑ 13, 2013 ‑ 14 and 2014 ‑ 15 income years—those income years. (2) In this section: new Subdivision 842 ‑ I means Subdivision 842 ‑ I (Investment Manager Regime) of the Income Tax Assessment Act 1997 , as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 . Note: The new Subdivision 842 ‑ I replaced a previous version of that Subdivision, which applied in relation to assessments for the 2010 ‑ 11 income year and later income years (see item 17 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 ).

Amendment history: Inserted by No 70 of 2015, effective sch 7 (item 12): 25 June 2015 (s 2(1) item 20)

s 842-208 — Modified meaning of IMR foreign fund for the purposes of earlier income years

(1) This section applies for the purposes of: (a) this Subdivision (apart from section 842 ‑ 207); and (b) Subdivision 842 ‑ I (Investment Manager Regime) of the Income Tax Assessment Act 1997 , as substituted by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 (the new IMR Schedule ). (2) Treat an entity as an IMR foreign fund if, and only if: (a) it is an IMR entity (within the meaning given by section 842 ‑ 220 of the Income Tax Assessment Act 1997 , as inserted by the new IMR Schedule); and (b) subject to subsection (3) of this section, it is an IMR widely held entity (within the meaning given by sections 842 ‑ 230 and 842 ‑ 240 of the Income Tax Assessment Act 1997 , as inserted by the new IMR Schedule); and (c) the entity chooses to be treated as an IMR foreign fund for those purposes. (3) Treat subsection 842 ‑ 230(1) of the Income Tax Assessment Act 1997 , as inserted by the new IMR Schedule, as not applying to the entity.

Amendment history: Inserted by No 70 of 2015, effective sch 7 (item 12): 25 June 2015 (s 2(1) item 20)

s 842-209 — Residence of corporate limited partnerships

If an IMR entity makes a choice under paragraph 842 ‑ 208(2)(c), section 94T of the Income Tax Assessment Act 1936 as amended by Schedule 7 to the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 , applies to the entity in relation to the income years in relation to which this Subdivision applies to the entity.

Amendment history: Inserted by No 70 of 2015, effective sch 7 (item 12): 25 June 2015 (s 2(1) item 20)

s 842-210 — Treatment of IMR foreign fund that is a corporate tax entity

Objects (1) The object of this section is to disregard, for the purpose of calculating the assessable income of a corporate tax entity that is an IMR foreign fund, certain gains and losses that arise in the 2010 ‑ 11 income year, or an earlier income year, in respect of certain kinds of financial arrangements. Application (2) This section applies to a corporate tax entity that is an IMR foreign fund in relation to an income year if: (a) the income year is the 2010 ‑ 11 income year or an earlier income year; and (b) the corporate tax entity has pre ‑ 2012 IMR income, a pre ‑ 2012 IMR deduction, a pre ‑ 2012 IMR capital gain or a pre ‑ 2012 IMR capital loss in relation to the income year; and (c) the corporate tax entity has not lodged an income tax return in relation to the 2010 ‑ 11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the corporate tax entity for any income year. Note 1: For the purposes of this Act, pre ‑ 2012 IMR income is defined in subsections 842 ‑ 270(1) and (2) of the Income Tax Assessment Act 1997 and pre ‑ 2012 IMR capital gain is defined in subsection 842 ‑ 270(3) of that Act. Note 2: Pre ‑ 2012 IMR deduction is defined in subsections 842 ‑ 230(1) and (2) of this Act and pre ‑ 2012 IMR capital loss is defined in section 842 ‑ 235 of this Act. Certain amounts disregarded (3) In working out the corporate tax entity’s taxable income, tax loss or net capital loss for the income year: (a) treat the corporate tax entity’s pre ‑ 2012 IMR income for the income year as non ‑ assessable non ‑ exempt income; and (b) disregard the corporate tax entity’s pre ‑ 2012 IMR deduction for the income year; and (c) disregard the corporate tax entity’s pre ‑ 2012 IMR capital gain for the income year; and (d) disregard the corporate tax entity’s pre ‑ 2012 IMR capital loss for the income year. Fraud (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the corporate tax entity in relation to any income year. Audit or compliance review (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the corporate tax entity that an audit or compliance review would be undertaken in relation to any income year.

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 842-215 — Treatment of foreign resident beneficiary that is not a trust or partnership

Objects (1) The objects of this section are to ensure that: (a) a foreign resident beneficiary of an IMR foreign fund in relation to the 2010 ‑ 11 income year or an earlier income year is not subject to Australian income tax in respect of pre ‑ 2012 IMR income or a pre ‑ 2012 IMR capital gain of the fund (or in respect of an amount that is referable to pre ‑ 2012 IMR income or a pre ‑ 2012 IMR capital gain of the fund) for the income year; and (b) the foreign resident beneficiary of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (i) pre ‑ 2012 IMR income of the fund (or referable to pre ‑ 2012 IMR income of the fund); or (ii) a pre ‑ 2012 IMR capital gain of the fund (or referable to a pre ‑ 2012 IMR capital gain of the fund); and (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). Application (2) This section applies to a beneficiary of a trust in relation to the 2010 ‑ 11 income year, or an earlier income year, if: (a) the beneficiary is not a resident of Australia at any time during the income year; and (b) the beneficiary is not a trust or partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the trust nor the beneficiary has lodged an income tax return in relation to the 2010 ‑ 11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the beneficiary for any income year. Note: A trust that is an IMR foreign fund is generally subject to the general tax rules that apply to trusts, subject to the modifications in this Subdivision: see Division 6 of Part III of the Income Tax Assessment Act 1936 . Also see section 842 ‑ 225 of this Act, which deals with trustees of IMR foreign funds. Adjustments to calculation of taxable income, tax loss or net capital loss (3) In working out the beneficiary’s taxable income, tax loss or net capital loss for the income year: (a) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and (b) for the purposes of applying subsections 98A(1) and (3) of Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in those subsections to individual interest of the beneficiary in the net income with references to individual interest of the beneficiary in the pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and (c) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to Division 6E net income with references to pre ‑ 2012 non ‑ IMR Division 6E net income (within the meaning of subsection 842 ‑ 240(2) of the Income Tax (Transitional Provisions) Act 1997 ); and (d) in applying subsection 115 ‑ 215(3) of the Income Tax Assessment Act 1997 to the beneficiary, replace the reference in that subsection to each capital gain of the trust estate with a reference to each capital gain of the trust estate that is a pre ‑ 2012 non ‑ IMR net capital gain (or is referable to a pre ‑ 2012 non ‑ IMR net capital gain of the trust estate) (within the meaning of subsection 842 ‑ 240(3) of the Income Tax (Transitional Provisions) Act 1997 ); and (e) in applying section 115 ‑ 225 of the Income Tax Assessment Act 1997 to the beneficiary: (i) replace references in that section to net income of the trust estate with references to pre ‑ 2012 non ‑ IMR net income of the trust estate (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and (ii) replace the reference in that section to net capital gain (if any) with a reference to pre ‑ 2012 non ‑ IMR net capital gain (if any) (within the meaning of subsection 842 ‑ 240(3) of the Income Tax (Transitional Provisions) Act 1997 ). (4) For the purposes of applying paragraph 115 ‑ 225(1)(a) of the Income Tax Assessment Act 1997 to the beneficiary in respect of the income year: (a) disregard a capital gain of the trust to the extent the capital gain is a pre ‑ 2012 IMR capital gain (or is referable to a pre ‑ 2012 IMR capital gain of the fund); and (b) disregard a pre ‑ 2012 IMR capital loss of the trust for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102 ‑ 5(1) of that Act; and (c) disregard a net capital loss of the trust to the extent that it is attributable to a pre ‑ 2012 IMR capital loss for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102 ‑ 5(1). Fraud (5) Subsections (3) and (4) do not apply if the Commissioner has reason to believe that there has been fraud by the trust in relation to any income year. Audit or compliance review (6) Subsections (3) and (4) do not apply if before 18 December 2010 the Commissioner notified the trust that an audit or compliance review would be undertaken in relation to any income year.

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 842-220 — Treatment of foreign resident partner that is not a trust or partnership

Objects (1) The objects of this section are to ensure that: (a) a foreign resident partner of an IMR foreign fund in relation to the 2010 ‑ 11 income year, or an earlier income year, is not subject to any Australian income tax in respect of pre ‑ 2012 IMR income or a pre ‑ 2012 IMR capital gain (or in respect of an amount that is referable to pre ‑ 2012 IMR income or a pre ‑ 2012 IMR capital gain) for the income year; and (b) the foreign resident partner of the fund is not able to claim a deduction or utilise a tax loss in relation to the income year to the extent that the deduction or tax loss was incurred or made in respect of an amount that is: (i) pre ‑ 2012 IMR income of the fund (or referable to pre ‑ 2012 IMR income of the fund); or (ii) a pre ‑ 2012 IMR capital gain (or referable to a pre ‑ 2012 IMR capital gain); and (c) this section does not provide any tax concession to an Australian resident that invests in the fund (whether directly or indirectly through one or more interposed entities). Application (2) This section applies to a partner in a partnership in relation to the 2010 ‑ 11 income year, or an earlier income year, if: (a) the partner is not an Australian resident at any time during the income year; and (b) the partner is not a trust or a partnership at any time during the income year (other than a foreign superannuation fund); and (c) neither the partnership nor the partner has lodged an income tax return in relation to the 2010 ‑ 11 income year, or any earlier income year, before the day that item 1 of Schedule 1 to the Tax Laws Amendment (Investment Manager Regime) Act 2012 commences; and (d) the Commissioner did not, before 18 December 2010, make an assessment of the taxable income of the partner for any income year. Note: A partnership that is an IMR foreign fund is generally subject to the general tax rules that apply to partnerships, subject to the modifications set out in this Subdivision: see Division 5 of Part III of the Income Tax Assessment Act 1936 . Adjustments to calculation of taxable income, tax loss or net capital loss (3) In working out the partner’s taxable income, tax loss or net capital loss for the income year: (a) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the net income of the partnership with references to the individual interest of the partner in the pre ‑ 2012 non ‑ IMR partnership net income (within the meaning of section 842 ‑ 245 of the Income Tax (Transitional Provisions) Act 1997 ); and (b) for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership loss with references to the individual interest of the partner in the pre ‑ 2012 non ‑ IMR partnership loss (within the meaning of section 842 ‑ 245 of the Income Tax (Transitional Provisions) Act 1997 ); and (c) disregard the partner’s pre ‑ 2012 IMR capital gain or an amount that is referable to a pre ‑ 2012 IMR capital gain (within the meaning of subsection 842 ‑ 270(3) of the Income Tax Assessment Act 1997 ) or pre ‑ 2012 IMR capital loss or an amount that is referable to a pre ‑ 2012 IMR capital loss (within the meaning of that term in section 842 ‑ 235 of this Act). Fraud (4) Subsection (3) does not apply if the Commissioner has reason to believe that there has been fraud by the partnership in relation to any income year. Audit or compliance review (5) Subsection (3) does not apply if before 18 December 2010 the Commissioner notified the partnership that an audit or compliance review would be undertaken in relation to any income year.

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 842-225 — Treatment of trustee of an IMR foreign fund

Objects (1) The object of this section is to ensure that the following provisions interact appropriately with the tax concessions mentioned in subsection 842 ‑ 210(1), paragraphs 842 ‑ 215(1)(a) and (b) and paragraphs 842 ‑ 220(1)(a) and (b) in respect of the 2010 ‑ 11 income year or an earlier income year: (a) subsection 115 ‑ 220(2) of the Income Tax Assessment Act 1997 ; (b) section 115 ‑ 225 of the Income Tax Assessment Act 1997 ; (c) section 98 of the Income Tax Assessment Act 1936 ; (d) section 99E of the Income Tax Assessment Act 1936 . Note: Division 6 of Part III of the Income Tax Assessment Act 1936 , Division 115 of the Income Tax Assessment Act 1997 , and all other provisions of those Acts apply to the trustee of an IMR foreign fund, subject to the modifications in this section. Application (2) This section applies to the 2010 ‑ 11 income year or an earlier income year of a trustee of a trust that is an IMR foreign fund in relation to that income year. Applying subsection 115 ‑ 220(2) of the Income Tax Assessment Act 1997 (3) For the purposes of applying subsection 115 ‑ 220(2) of the Income Tax Assessment Act 1997 to the beneficiary: (a) disregard a capital gain of the IMR foreign fund to the extent that the capital gain is a pre ‑ 2012 IMR capital gain; and (b) disregard a pre ‑ 2012 IMR capital loss of the IMR foreign fund for the purposes of determining the amount of the capital gain remaining after applying steps 1 to 4 of the method statement in subsection 102 ‑ 5(1); and (c) disregard a net capital loss of the IMR foreign fund to the extent that it is attributable to a pre ‑ 2012 IMR capital loss for the purposes of determining how much of a capital gain that is not a pre ‑ 2012 IMR capital gain remains after applying steps 1 to 4 of the method statement in subsection 102 ‑ 5(1). Note: The effect of this subsection is that the increase to the assessable amount which occurs as a result of section 115 ‑ 220 of the Income Tax Assessment Act 1997 is calculated with reference to the capital gains of the IMR foreign fund that are not IMR capital gains or amounts referable to IMR capital gains (rather than by calculating the increase with reference to all capital gains of the fund). Modifications to section 115 ‑ 225 of the Income Tax Assessment Act 1997 (4) For the purposes of applying section 115 ‑ 225 of the Income Tax Assessment Act 1997 in respect of section 115 ‑ 220, make the following assumptions: (a) replace the references in section 115 ‑ 225 to the net income of the trust estate with references to the pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ) of the trust estate; (b) replace the references in section 115 ‑ 225 to net capital gain (if any) with a reference to pre ‑ 2012 non ‑ IMR net capital gain (if any) (within the meaning of subsection 842 ‑ 240(3) of the Income Tax (Transitional Provisions) Act 1997 ). Modifications to section 98 of the Income Tax Assessment Act 1936 (5) For the purposes of applying section 98 of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010 ‑ 11 income year or an earlier income year, replace references in that section to net income with references to pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ). Note: The effect of this subsection is that where section 98 of the Income Tax Assessment Act 1936 applies to the trustee of a trust that is an IMR foreign fund, the trustee is only assessed and made liable to pay tax in respect of pre ‑ 2012 non ‑ IMR net income of the fund (rather than in respect of all net income of the fund to which section 98 would otherwise apply). Modifications to section 99E of the Income Tax Assessment Act 1936 (6) For the purposes of applying section 99E of the Income Tax Assessment Act 1936 in respect of an income year that is the 2010 ‑ 11 income year or an earlier income year: (a) replace the reference to so much of the net income with a reference to so much of the net income or pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ) as the case may be; and (b) replace the reference to a part of the net income of another trust estate with a reference to a part of the pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ) of another trust estate. Note: The effect of this subsection is that the trustee of a trust that receives a distribution of pre ‑ 2012 non ‑ IMR net income from another trust is not required to apply section 98, 99 or 99A of the Income Tax Assessment Act 1936 to those amounts. Certain losses disregarded (7) The IMR foreign fund cannot utilise a tax loss or net capital loss in relation to the income year, or in any future income year, to the extent the loss is attributable to pre ‑ 2012 IMR income, a pre ‑ 2012 IMR capital gain, a pre ‑ 2012 IMR deduction or a pre ‑ 2012 IMR capital loss.

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 842-230 — Pre ‑ 2012 IMR deduction

(1) The pre ‑ 2012 IMR deduction of an IMR foreign fund for an income year is the amount of the fund’s deductions for the income year to the extent to which they: (a) are attributable to gaining the fund’s pre ‑ 2012 IMR income; and (b) relate to the 2011 ‑ 12 income year, or an earlier income year. (2) Disregard the following provisions for the purposes of determining the pre ‑ 2012 IMR deduction of the fund: (a) subsection 842 ‑ 210(3) (which is about certain amounts of an IMR foreign fund being disregarded); (b) paragraph 842 ‑ 240(1)(b) (which is about pre ‑ 2012 non ‑ IMR net income); (c) paragraph 842 ‑ 245(a) (which is about pre ‑ 2012 non ‑ IMR partnership net income).

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 842-235 — Pre ‑ 2012 IMR capital loss

The pre ‑ 2012 IMR capital loss of an IMR foreign fund for an income year is the sum of the fund’s capital losses made in the income year that are attributable to CGT assets that are financial arrangements covered by section 842 ‑ 245 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 842-240 — Pre ‑ 2012 non ‑ IMR net income , pre ‑ 2012 non ‑ IMR Division 6E net income and pre ‑ 2012 non ‑ IMR net capital gain

(1) A trust’s pre ‑ 2012 non ‑ IMR net income in relation to an income year is determined by calculating the net income of the trust as follows: (a) for income years prior to the 2010 ‑ 11 income year—disregard the pre ‑ 2012 IMR capital gain and pre ‑ 2012 IMR capital loss; (b) disregard the pre ‑ 2012 IMR income and pre ‑ 2012 IMR deduction of the trust for the income year; (c) disregard any amount that is included in the trust’s assessable income under subsection 207 ‑ 35(1) to the extent that the amount is attributable to pre ‑ 2012 IMR income of the trust for the income year; (d) if the trust is a beneficiary of another trust—then: (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace the references in that Division to share of the net income with references to share of the pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the trust that is a beneficiary, replace references in that Division to Division 6E net income with references to pre ‑ 2012 non ‑ IMR Division 6E net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ); (e) if the trust is a partner in a partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre ‑ 2012 non ‑ IMR partnership net income or pre ‑ 2012 non ‑ IMR partnership loss (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ). Note: The net income of a trust may include a share of the net income of another trust. Where there is a chain of trusts, these calculations are applied to each trust in the chain. Pre ‑ 2012 non ‑ IMR Division 6E net income (2) A trust’s pre ‑ 2012 non ‑ IMR Division 6E net income in relation to an income year is determined by calculating the Division 6E net income (within the meaning of subsection 102UY(3) of the Income Tax Assessment Act 1936 ) of the trust as follows: (a) disregard the pre ‑ 2012 IMR income and pre ‑ 2012 IMR deduction of the trust in relation to the income year; (b) disregard the things mentioned in subparagraphs 102UW(b)(i) to (iii) of the Income Tax Assessment Act 1936 (which is about adjustments of Division 6 assessable amounts) in relation to the income year. Pre ‑ 2012 non ‑ IMR net capital gain (3) A trust’s pre ‑ 2012 non ‑ IMR net capital gain in relation to an income year is determined by calculating the net capital gain of the trust as follows: (a) disregard the trust’s pre ‑ 2012 IMR capital gain and pre ‑ 2012 IMR capital loss in relation to the income year; (b) disregard any capital gain of the trust in relation to the income year that is referable to a pre ‑ 2012 IMR capital gain of another IMR foreign fund that is a trust.

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 842-245 — Pre ‑ 2012 non ‑ IMR partnership net income and pre ‑ 2012 non ‑ IMR partnership loss

A partnership’s pre ‑ 2012 non ‑ IMR partnership net income or pre ‑ 2012 non ‑ IMR partnership loss in relation to an income year is determined by calculating the net income or partnership loss of the partnership as follows: (a) disregard the pre ‑ 2012 IMR income and pre ‑ 2012 IMR deduction of the partnership for the income year; (b) disregard any amount included in the partnership’s assessable income under subsection 207 ‑ 35(1) to the extent that the amount is attributable to pre ‑ 2012 IMR income of the partnership for the income year; (c) if the partnership is a beneficiary of a trust—then: (i) for the purposes of applying Division 6 of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace the references in that Division to share of the net income with references to share of the pre ‑ 2012 non ‑ IMR net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ); and (ii) for the purposes of applying Division 6E of Part III of the Income Tax Assessment Act 1936 to the beneficiary, replace references in that Division to Division 6E net income with references to pre ‑ 2012 non ‑ IMR Division 6E net income (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ); (d) if the partnership is a partner in another partnership—for the purposes of applying Division 5 of Part III of the Income Tax Assessment Act 1936 to the partner, replace the references in that Division to the individual interest of the partner in the partnership net income or partnership loss with references to the individual interest of the partner in the pre ‑ 2012 non ‑ IMR partnership net income or pre ‑ 2012 non ‑ IMR partnership loss (within the meaning of subsection 842 ‑ 240(1) of the Income Tax (Transitional Provisions) Act 1997 ). Note: The net income of a partnership may include a share of the net income of another partnership. Where there is a chain of partnerships, these calculations are applied to each partnership in the chain.

Amendment history: Inserted by No 126 of 2012, effective Schedule 2: Royal Assent

s 880-1 — Application of Division 880 of the Income Tax Assessment Act 1997

Division 880 of the Income Tax Assessment Act 1997 applies to the 2019 ‑ 20 income year and later income years.

Amendment history: Inserted by No 34 of 2019, effective sch 4 (item 7): 1 July 2019 (s 2(1) item 2)

s 880-5 — Certain income of sovereign entity in respect of a scheme is non ‑ assessable non ‑ exempt income if covered by a private ruling

An amount of ordinary income or statutory income of a sovereign entity for an income year is not assessable income and is not exempt income if: (a) the amount is a return on an investment asset under a scheme; and (b) the sovereign entity acquired the investment asset on or before 27 March 2018 under the scheme; and (c) on or before 27 March 2018, the sovereign entity applied for a private ruling in relation to the scheme; and (d) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the investment asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and (e) the private ruling applied during at least part of the period: (i) starting on 27 March 2018; and (ii) ending before 1 July 2026; regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (f) the scheme carried out is not materially different to the scheme specified in the private ruling; and (g) the income year is: (i) unless subparagraph (ii) applies—the 2025 ‑ 26 income year or an earlier income year; or (ii) if the last income year to which the private ruling relates is a later income year than the 2025 ‑ 26 income year—that later income year, or an earlier income year.

Amendment history: Inserted by No 34 of 2019, effective sch 4 (item 7): 1 July 2019 (s 2(1) item 2)

s 880-10 — Certain amounts of sovereign entity in respect of a scheme are not deductible if covered by a private ruling

A sovereign entity cannot deduct an amount for an income year if: (a) the amount is a loss in respect of an investment asset under a scheme; and (b) the requirements in paragraphs 880 ‑ 5(b) to (g) are satisfied.

Amendment history: Inserted by No 34 of 2019, effective sch 4 (item 7): 1 July 2019 (s 2(1) item 2)

s 880-15 — Sovereign entity’s capital gain from membership interest etc.—gain disregarded

Disregard a capital gain of a sovereign entity from a CGT event that happens in relation to a CGT asset if: (a) the capital gain arises under a scheme; and (b) the CGT asset is a membership interest, non ‑ share equity interest or debt interest in another entity; and (c) the requirements in paragraphs 880 ‑ 5(b) to (g) are satisfied (on the assumption that references in those paragraphs to the investment asset were references to the CGT asset).

Amendment history: Inserted by No 34 of 2019, effective sch 4 (item 7): 1 July 2019 (s 2(1) item 2)

s 880-20 — Sovereign entity’s capital loss from membership interest etc.—loss disregarded

Disregard a capital loss of a sovereign entity from a CGT event that happens at a time if, on the assumption that the loss were a capital gain that happened at that time, the capital gain would be disregarded because of section 880 ‑ 15.

Amendment history: Inserted by No 34 of 2019, effective sch 4 (item 7): 1 July 2019 (s 2(1) item 2)

s 880-25 — Asset of sovereign entity—deemed sale and purchase

(1) This section applies if: (a) a sovereign entity acquired an asset (other than money) on or before 27 March 2018 under a scheme; and (b) on or before 27 March 2018, the sovereign entity applied for a private ruling in relation to the scheme; and (c) before 1 July 2026, the Commissioner gave the entity a private ruling confirming that income from the asset was not subject to income tax, or withholding tax, because of the doctrine of sovereign immunity; and (d) the private ruling applied during at least part of the period: (i) starting on 27 March 2018; and (ii) ending before 1 July 2026; regardless of whether the private ruling started to apply before 27 March 2018, or ceased to apply before 1 July 2026; and (e) the sovereign entity holds the asset on the day mentioned in subsection (5). (2) For the purposes mentioned in subsection (3), the sovereign entity is taken: (a) to have disposed of the asset, immediately before the day mentioned in subsection (5), for a consideration equal to its market value; and (b) to have acquired the asset again, immediately after the disposal mentioned in paragraph (a), for a consideration equal to the higher of the following: (i) its market value immediately before that disposal; (ii) its cost base immediately before that disposal. (3) The purposes are as follows: (a) the purposes of Parts 3 ‑ 1 and 3 ‑ 3 of the Income Tax Assessment Act 1997 ; (b) if the asset is a revenue asset—determining whether an amount is included in, or can be deducted from, the assessable income of the entity. (4) Despite subsection (3): (a) disregard any capital gain or capital loss the sovereign entity makes because of the disposal mentioned in paragraph (2)(a); or (b) if the asset is a revenue asset—disregard any amount that could (apart from this subsection) be included in, or be deducted from, the assessable income of the entity as a result of that disposal. (5) For the purposes of paragraphs (1)(e) and (2)(a), the day is: (a) unless paragraph (b) applies—the later of the following days: (i) 1 July 2026; (ii) the day before the private ruling ceases to apply; or (b) a day earlier than the day mentioned in paragraph (a), if: (i) the scheme mentioned in paragraph (1)(a) is not, when it is first carried out, materially different to the scheme specified in the private ruling; and (ii) it becomes, on the earlier day, materially different to the scheme specified in the private ruling.

Amendment history: Inserted by No 34 of 2019, effective sch 4 (item 7): 1 July 2019 (s 2(1) item 2)

s 909-1 — Regulations

The Governor ‑ General may make regulations prescribing matters: (a) required or permitted by this Act to be prescribed; or (b) necessary or convenient to be prescribed for carrying out or giving effect to this Act.

Amendment history: Inserted by No 164 of 2007, effective Schedule 7 (items 4, 13, 14): Royal Assent Schedule 10 (items 89, 90): 1 July 2010

s 960-20 — Utilisation—corporate loss carry back

(1) For the purposes of subsection 960 ‑ 20(2) of the Income Tax Assessment Act 1997 , a tax loss is utilised to the extent that it is carried back under former Division 160 of that Act (which provided for a corporate loss carry back tax offset). (2) For the purposes of subsection 960 ‑ 20(4) of that Act, net exempt income for an income year is utilised to the extent that, because of it, an amount was reduced under step 2 of the method statement in former subsection 160 ‑ 15(2) of that Act (which was about calculating a loss carry back tax offset component).

Amendment history: Inserted by No 96 of 2014, effective sch 2 (items 2, 42 ‑ 44): 30 Sept 2014 (s 2(1) item 2 and F2014L01256)

s 960-100 — Effect of this Subdivision

This Subdivision has effect for the purposes of the Income Tax Assessment Act 1936 , the Income Tax Assessment Act 1997 , the Taxation Administration Act 1953 and this Act.

Amendment history: Inserted by No 117 of 1999, effective Sch 2 (item 1): 22 Sept 1999 (s 2(1))

s 960-105 — Entities, and members of entities, benefiting from the application of this Subdivision

(1) This Subdivision applies to an entity if, and only if: (a) the entity is a managed investment scheme for the purposes of the Corporations Law; and (b) the scheme has been or is registered by the Australian Securities and Investments Commission under section 601EB of the Corporations Law; and (c) the entity was a managed investment scheme as mentioned in paragraph (a) at all times from the commencement of 1 July 1998 until the registration of the scheme as mentioned in paragraph (b); and (d) the entity was the same kind of entity immediately before, and immediately after, the scheme was so registered; and (e) changes to the scheme that were necessary to be made to enable the scheme to be registered as mentioned in paragraph (b) were made during the period beginning on 1 July 1998 and ending on 30 June 2000 (the transition period ); and (f) the membership of the scheme did not alter as a result of the changes; and (g) where any other changes were or are made to the scheme during the transition period: (i) the other changes were or are made only for the purpose of improving the administration or operation of the scheme; and (ii) there were no increases in the values of the interests of any members of the scheme as a result of the other changes or, if there were any such increases, they applied proportionately to the values of the interests of all the members of the scheme; and (iii) no reductions in the values of the interests of any members of the scheme occurred as a result of the other changes; and (iv) the membership of the scheme did not alter as a result of the other changes. (2) If this Subdivision applies to an entity under subsection (1) because of a particular change referred to in that subsection, it also applies because of the change to a member of the entity, in relation to the member’s interests in the entity, if the member was a member immediately before, and immediately after, the change was made.

Amendment history: Inserted by No 117 of 1999, effective Sch 2 (item 1): 22 Sept 1999 (s 2(1)) | Amended by No 66 of 2000, effective Sch 1: 22 Sept 1999 (s 2(2))

s 960-110 — No taxation consequences to result from changes to managed investment scheme

Despite the changes made as mentioned in subsection 960 ‑ 105(1) to the managed investment scheme constituted by an entity to which this Subdivision applies: (a) the entity is taken, immediately after the changes were made or, if the changes were made at different times, immediately after the last of the changes was made, to be the same entity as existed immediately before the changes were made or, if the changes were made at different times, immediately before the first of the changes was made; and (b) the legal ownership of the assets of the entity is taken not to have altered as a result of the changes; and (c) the beneficial ownership of the interests in the entity of a member of the entity to whom, because of a particular change, this Subdivision applies in relation to those interests is taken not to have altered as a result of the change; and (d) without limiting by implication any other effect of the above paragraphs: (i) the changes are taken not to have resulted in a CGT event in respect of the entity; and (ii) in so far as this Subdivision applies to a member of the entity because of a particular change, the change is taken not to have resulted in a CGT event in respect of the member in relation to the member’s interests in the entity.

Amendment history: Inserted by No 117 of 1999, effective Sch 2 (item 1): 22 Sept 1999 (s 2(1)) | Amended by No 66 of 2000, effective Sch 1: 22 Sept 1999 (s 2(2))

s 960-115 — Certain entities treated as agents

A declaration made by the Commissioner for the purposes of paragraph (b) of the definition of agent in subsection 995 ‑ 1(1) of the Income Tax Assessment Act 1997 and in force immediately before the Tax Laws Amendment (2006 Measures No. 2) Act 2006 received the Royal Assent continues to have effect for the purposes of section 960 ‑ 105 of the Income Tax Assessment Act 1997 .

Amendment history: Inserted by No 58 of 2006, effective Schedule 3 (items 4–7) and Schedule 7 (items 120–124): Royal Assent Schedule 5 (items 4, 5): 1 July 2002

s 960-262 — Application of Subdivision 960 ‑ M of the Income Tax Assessment Act 1997

(1) Subdivision 960 ‑ M of the Income Tax Assessment Act 1997 (about indexation) applies to assessments for the 1998 ‑ 99 income year and later income years (except so far as it affects the car depreciation limit). (2) For the car depreciation limit (see section 42 ‑ 80 of the Income Tax Assessment Act 1997 ), that Subdivision applies to the 1998 ‑ 99 financial year and later financial years.

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 2 (items 1–3), Sch 3 (items 1, 2), Sch 4 (item 1), Sch 5 (items 1, 2), Sch 6 (item 1), Sch 7 (item 1), Sch 8 (item 1) and Sch 9 (items 1, 8): 22 June 1998 (s 2)

s 960-275 — Indexation factor

(1) This section applies to a CGT asset that: (a) is a share in a company that was issued or allotted to you by the company or a unit in a unit trust that was issued to you by the trustee; and (b) you acquired before 16 August 1989; and (c) you owned just before the start of the 1998 ‑ 99 income year. (2) In working out the cost base of the cost base of the asset, you ignore subsection 960 ‑ 275(3) and use the indexation factor in subsection 960 ‑ 275(2).

Amendment history: Inserted by No 46 of 1998, effective s 4, Sch 2 (items 1–3), Sch 3 (items 1, 2), Sch 4 (item 1), Sch 5 (items 1, 2), Sch 6 (item 1), Sch 7 (item 1), Sch 8 (item 1) and Sch 9 (items 1, 8): 22 June 1998 (s 2)