Document ID: chunk:federal_register_of_legislation:C2010C00605:clause:4_4:p9
Version: federal_register_of_legislation:C2010C00605
Segment Type: clause
Provision Reference: sch 4 cl 4 (pt 9/10)
Character Range: 81566–84383

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;
and for those purposes:
 (c) the subject membership interest is taken to be a membership interest that the *head company of the group holds directly in the second linked entity; and
 (d) the requirements of paragraphs 705‑57(2)(a) and (b) are taken to be satisfied in relation to the subject membership interest; and
 (e) the subject membership interest is taken to have a *cost base and *reduced cost base equal to the subsection 705‑225(3) tax cost setting amount; and
 (f) the subject membership interest is taken to have a loss of pre‑CGT status adjustment amount equal to the notional section 705‑57 reduction amount.

Note: If the head company actually held any membership interests in the second linked entity, or if other linked entities held membership interests in the second linked entity to which this subsection also applied, those membership interests would also be taken into account in working out the reduction under paragraph (a) and in applying paragraph (b).

705‑245  Working out pre‑CGT factors where subsidiary members have membership interests in other subsidiary members

Object

 (1) The object of this section is to ensure that, where linked entities hold *membership interests in other linked entities, the pre‑CGT status of membership interests held by the *head company, and not the pre‑CGT status of membership interests held by other linked entities, is used to work out the *pre‑CGT factor under section 705‑125 for assets of the other linked entities.

Pre‑CGT factor to be worked out from top down

 (2) If linked entities hold *membership interests in any other linked