Document ID: chunk:federal_register_of_legislation:C2010C00690:clause:1_3:p6
Version: federal_register_of_legislation:C2010C00690
Segment Type: clause
Provision Reference: sch 1 cl 3 (pt 6/20)
Character Range: 109428–112202

revenue losses) that existed in respect of the *head company's *membership interests in the joining entity just before the joining time. This is done because the head company's cost of becoming the holder of the joining entity's assets is recognised under this Division as an amount reflecting the group's cost of acquiring the joining entity.

Section applies if potential application of Subdivision 165‑CC to membership interests in joining entity

 (2) This section applies if, assuming the *head company had, just before the joining time, made a *capital loss or a *trading stock loss in respect of a *CGT event that happened to a *CGT asset consisting of its *membership interests (the Subdivision 165‑CC membership interests) in the joining entity, Subdivision 165‑CC would apply to the head company.

Subdivision 165‑CC becomes potentially applicable to proportion of assets acquired by head company

 (3) If this section applies, then, in applying Subdivision 165‑CC for the head company core purposes, the following percentage of each of the *CGT assets, that become those of the head company because subsection 701‑1(1) (the single entity rule) applies, is taken to have been owned by the *head company at the changeover time mentioned in sections 165‑115C and 165‑115D:

Entry history rule not to give rise to application of Subdivision 165‑CC

 (4) For the *head company core purposes, section 701‑5 (the entry history rule) does not have the effect that Subdivision 165‑CC applies to a *capital loss or a *trading stock loss in respect of a *CGT event that happens to any *CGT asset that becomes that of the head company because subsection 701‑1(1) (the single entity rule) applies.

How to work out a pre‑CGT factor for assets of joining entity

705‑125  Pre‑CGT factor for assets of joining entity

Object

 (1) Because intra‑group *membership interests in the joining entity are disregarded under subsection 701‑1(1) (the single entity rule), the object of this section is to provide a mechanism to ensure that the benefit of the pre‑CGT status of those interests is not lost. That mechanism involves working out a factor by which the pre‑CGT status can be attached to the joining entity's assets and then recognised in membership interests held in an entity that owns the assets on ceasing to be a *subsidiary member of the joined group.

Pre‑CGT factor to be worked out for certain assets

 (2) A pre‑CGT factor is worked out under this section for each asset of the joining entity at the joining time, other than one that, in accordance with *accounting standards, is a current asset.

Note: A pre‑CGT factor is not worked out for current assets because they would, in the ordinary course of operations of the joining entity, be consumed or disposed