Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p28
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 28/45)
Character Range: 5978584–5981470

entity's interest in third linked entity's profit/loss adjustment amount
 (5) The first linked entity's interest in the third linked entity's profit/loss adjustment amount is worked out using the formula:
where:
market value of first linked entity's membership interests in third linked entity held through second linked entity means the *market value of all *membership interests in the third linked entity that the first linked entity holds indirectly through the second linked entity (including through that entity and one or more other linked entities that are interposed between the second linked entity and the third linked entity).

705‑240  Modified application of section 705‑57

Object
 (1) The object of this section is to ensure that, in working out *tax cost setting amounts for *trading stock, *depreciating assets, *registered emissions units or *revenue assets of the linked entities, section 705‑57 (about loss of pre‑CGT status of certain membership interests) only applies if the *membership interests held directly by the *head company of the group are affected.

Modified application of section 705‑57—basic modification
 (2) For the purposes of applying section 705‑57 in accordance with this Subdivision, a reference in that section to a *membership interest that a *member of the joined group holds in the joining entity at the joining time is taken to be a reference to a membership interest that the *head company of the *consolidated group holds directly in a linked entity at the time the linked entity becomes a *subsidiary member.

Modified application of section 705‑57—additional modifications where section 705‑225 applies
 (3) Also, if a linked entity (the first linked entity) holds a *membership interest (the subject membership interest) in another linked entity (the second linked entity), section 705‑57 (as modified in accordance with subsection (2)) is to be applied in relation to the subject membership interest as follows.
 (4) First work out whether there would be a reduction under that section in the *tax cost setting amount for the subject membership interest that is used as mentioned in subsection 705‑225(3) (the subsection 705‑225(3) tax cost setting amount) if:
 (a) the subject membership interest, if it is not a revenue etc. asset of the first linked entity, were taken to be such an asset; and
 (b) paragraphs 705‑57(2)(c) and (d) and subsection 705‑57(7) did not apply to the subject membership interest.
 (5) Next, if there would be such a reduction (whose amount is the notional section 705‑57 reduction amount):
 (a) apply section 705‑57 to reduce the *tax cost setting amount for any revenue etc. asset of the second linked entity; and
 (b) if the second linked entity holds a *membership interest in another linked entity—apply section 705‑57 in relation to that interest in accordance with subsection (3) of this section;