Document ID: chunk:federal_register_of_legislation:C2010C00604:clause:1_10:p1
Version: federal_register_of_legislation:C2010C00604
Segment Type: clause
Provision Reference: sch 1 cl 10 (pt 1/2)
Character Range: 25711–28565

10  Section 705‑235
Repeal the section, substitute:

705‑235  Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain linked entities

Object

 (1) The object of this section is to prevent a distortion under section 705‑35 in the allocation of *allocable cost amount to a linked entity where that entity has direct or indirect *membership interests in another linked entity that has certain profits or tax losses.

Adjustment to allocation of allocable cost amount where direct interest in linked entity with profits/losses

 (2) If:
 (a) a linked entity has *membership interests in a second linked entity; and
 (b) in working out the group's *allocable cost amount for the second linked entity:
 (i) an amount is required to be added (the second linked entity's profit/loss adjustment amount) under step 3 in the table in section 705‑60 (about profits accruing before becoming a subsidiary member of the group); or
 (ii) an amount is required to be subtracted (also the second linked entity's profit/loss adjustment amount) under step 5 in the table in section 705‑60 (about losses accruing before becoming a subsidiary member of the group);
then, for the purposes of working out under section 705‑35 the *tax cost setting amount for the assets of the first linked entity, the *market value of the first linked entity's membership interests in the second linked entity is reduced (in a subparagraph (b)(i) case) or increased (in a subparagraph (b)(ii) case) by the first linked entity's interest in the second linked entity's profit/loss adjustment amount (see subsection (3)).

First linked entity's interest in second linked entity's profit/loss adjustment amount

 (3) The first linked entity's interest in the second linked entity's profit/loss adjustment amount is worked out using the formula:

Adjustment to allocation of allocable cost amount for indirect interest in linked entity with profits/losses

 (4) If:
 (a) a linked entity has *membership interests in a second linked entity; and
 (b) the second linked entity has, directly or indirectly through one or more interposed linked entities, membership interests in a third linked entity; and
 (c) in working out the group's *allocable cost amount for the third linked entity:
 (i) an amount is required to be added (the third linked entity's profit/loss adjustment amount) under step 3 in the table in section 705‑60 (about profits accruing before becoming a subsidiary member of the group); or
 (ii) an amount is required to be subtracted (also the third linked entity's profit/loss adjustment amount) under step 5 in the table in section 705‑60 (about losses accruing before becoming a subsidiary member of the group);
then, for the purposes of working out under section 705‑35 the *tax cost setting amount for the assets of the first