Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p10
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 10/45)
Character Range: 5932580–5935329

to which section 110‑40 (about expenditure on assets acquired before 7.30 pm on 13 May 1997) applies; or
 (c) to the extent that the expenditure reduced the undistributed profits comprising the step 3 amount in the table in section 705‑60.
 (3) Subsection (2) does not cover a deduction under section 43‑15 (which relates to *undeducted construction expenditure) if the joining entity *acquired the asset to which the deduction relates at or before 7.30 pm, by legal time in the Australian Capital Territory, on 13 May 1997.

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

705‑125  Pre‑CGT proportion for 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:
 (a) working out the proportion (measured by market value) of the membership interests in the joining entity that have pre‑CGT status; and
 (b) if the joining entity later ceases being a member of the group, attaching pre‑CGT status to that proportion of membership interests in it (see section 711‑65), subject to integrity rules (see section 711‑70).

How to work out pre‑CGT proportion
 (2) The pre‑CGT proportion is the amount worked out by dividing:
 (a) the sum of the *market value of each *membership interest in the joining entity that is:
 (i) held by a *member of the group at the joining time; and
 (ii) is a *pre‑CGT asset;
by:
 (b) the sum of the market value of each membership interest in the joining entity that is held by a member of the group at the joining time.

Modification if joining entity is a trust
 (4) If the joining entity is a trust, a *membership interest in it is not taken into account under subsection (2) unless the membership interest is either a unit or an interest in the trust.

Subdivision 705‑B—Case of group formation

Guide to Subdivision 705‑B

705‑130  What this Subdivision is about
      When a consolidated group comes into existence, the tax cost setting amount for the assets of each entity that becomes a subsidiary member is worked out by modifying the rules in Subdivision 705‑A, so that the amount reflects the cost to the group of acquiring the entity.

Table of sections

Application and object
705‑135 Application and object of this Subdivision

Modified application of Subdivision 705‑A
705‑140 Subdivision 705‑A has effect with modifications
705‑145 Order in which tax cost setting amounts are to be worked out where subsidiary members have membership interests in other subsidiary members
705‑147 Adjustment in working out step 3A of allocable cost