Document ID: chunk:federal_register_of_legislation:C2024C00267:section:3:p18
Version: federal_register_of_legislation:C2024C00267
Segment Type: section
Provision Reference: s 3 (pt 18/31)
Character Range: 652328–654943

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.

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).