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 6/9)
Character Range: 77897–80483

for the joining entity in accordance with section 705‑60; and
 (b) then reducing that amount by the total of the *tax cost setting amounts in accordance with section 705‑25 for each retained cost base asset (but not below zero); and
 (c) finally, allocating the result to each of the joining entity's reset cost base assets (other than excluded assets) in proportion to their *market values.

Note 1: For an asset consisting of an entitlement to receive an amount that will be included in assessable income, the market value of the asset would take into account the tax payable on the amount.

Note 2: If there are no reset cost base assets, the result is instead treated as a capital loss of the head company.

Excluded assets

 (2) An asset is covered by this subsection if, under any of the steps in the table in section 705‑60, the joined group's *allocable cost amount for the joining entity is reduced by an amount in respect of the asset.

Note: An example is an entitlement to a deduction, for which there is a reduction under step 2 in the table.

Goodwill resulting from ownership and control of the joining entity

 (3) If, just after the joining time, the *head company has, because of its ownership and control of the joining entity, a goodwill asset associated with assets or businesses of the joined group:
 (a) for the head company core purposes, the asset's *tax cost is set at the joining time at its *tax cost setting amount; and
 (b) for the purpose of doing so:
 (i) the asset is taken to be an asset of the joining entity that becomes an asset of the head company because subsection 701‑1(1) (the single entity rule) applies; and
 (ii) it is taken to have a *market value just before the joining time of an amount equal to its market value just after the joining time.

705‑40  Reduction in tax cost setting amount for revenue assets

Limit on tax cost setting amount

 (1) The *tax cost setting amount for a reset cost base asset to which subsection (2) applies (a revenue asset) must not exceed the greater of:
 (a) the asset's *market value; and
 (b) the joining entity's *terminating value for the asset.

Subsection applies to revenue assets

 (2) This subsection applies to a reset cost base asset if, assuming the *head company were to *dispose of it after the joining time, any gain or loss on the disposal would be taken into account in determining the taxable income or *tax loss of the head company, but any *capital gain or *capital loss on the disposal would be disregarded.

Note: For example, trading stock and depreciating assets.

Allocation