Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p92
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 92/95)
Character Range: 5782389–5784989

interest in any of the other entities;
this section has effect for the entity core purposes.

Object
 (2) The cost of any *membership interest that one of the entities holds in another is to be treated in the same way as membership interests held by the *head company. In both cases the object is to preserve the alignment of costs for membership interests and assets (that was established when each entity became a *subsidiary member) by recognising the cost of those interests, when it ceases to be a subsidiary member, as an amount equal to the cost of the entity's assets at that time reduced by the amount of its liabilities.

Setting tax cost of membership interests
 (3) The asset's *tax cost is set just before the entity ceases to be a *subsidiary member of the group at the asset's *tax cost setting amount.
Note: If the asset consists of a membership interest in a partnership, Subdivision 713‑E sets the tax cost of interests in partnership assets, rather than membership interests in the partnership.

Supporting provisions

701‑55  Setting the tax cost of an asset
 (1) This section states the meaning of the expression an asset's tax cost is set at a particular time at the asset's *tax cost setting amount.

Depreciating asset provisions
 (2) If any of Subdivisions 40‑A to 40‑D, sections 40‑425 to 40‑445 and Subdivisions 328‑D and 355‑E is to apply in relation to the asset, the expression means that the provisions apply as if:
 (a) the asset were *acquired at the particular time for a payment equal to its *tax cost setting amount; and
 (b) at that time the same method of working out the decline in value were chosen for the asset as applied to it just before that time; and
 (c) where just before that time the prime cost method applied for working out the asset's decline in value and the asset's tax cost setting amount does not exceed the joining entity's *terminating value for the asset—at that time an *effective life were chosen for the asset equal to the remainder of the effective life of the asset just before that time; and
 (d) where just before that time the prime cost method applied for working out the asset's decline in value and the asset's *tax cost setting amount exceeds the joining entity's terminating value for the asset—either:
 (i) the *head company were required to choose at that time an effective life for the asset in accordance with subsections 40‑95(1) and (3), and any choice of an effective life determined by the Commissioner were limited to one in force at that time; or
 (ii) an effective life for the asset were worked out under subsection