Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p16
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 16/19)
Character Range: 5873409–5876113

and does not *hold the underlying asset just before the joining time:
 (a) subsection (5) applies to the underlying asset in relation to the joining entity; and
 (b) the liability that is the lessee's obligation to make lease payments is not taken into account under subsection 705‑70(1).
Note: If the joining entity is the lessee under the lease and holds the underlying asset just before the joining time:
(a) the underlying asset will have its tax cost set at the joining time because it would be an asset of the joining entity at that time if the single entity rule did not apply (see section 701‑10); and
(b) the liability that is the lessee's obligation to make lease payments is taken into account under subsection 705‑70(1).

Tax cost of certain assets set at nil
 (5) If this subsection applies to an asset, in relation to the joining entity:
 (a) the asset is not taken into account under paragraph 705‑35(1)(b) or (c); and
 (b) the asset's *tax cost setting amount is taken to be nil.

705‑57  Adjustment to tax cost setting amount where loss of pre‑CGT status of membership interests in joining entity

Object
 (1) The object of this section is to ensure that provisions that cause *membership interests in the joining entity to stop being *pre‑CGT assets, with a resultant increase in their *cost base and *reduced cost base, do not increase *tax cost setting amounts for *trading stock, *depreciating assets, *registered emissions units or *revenue assets of the joining entity, where those amounts are above the joining entity's *terminating values for the assets.

When section applies
 (2) This section applies if:
 (a) a *membership interest that a *member of the joined group holds in the joining entity at the joining time had previously stopped being a *pre‑CGT asset in the circumstances covered by any of subsections (3) to (5); and
 (b) the *cost base or *reduced cost base of the membership interest just after it stopped being a pre‑CGT asset exceeded (the excess being the loss of pre‑CGT status adjustment amount) its cost base or reduced cost base just before it stopped being a pre‑CGT asset; and
 (c) an asset (a revenue etc. asset) that is *trading stock, a *depreciating asset, a *registered emissions unit or a *revenue asset becomes that of the *head company of the joined group because subsection 701‑1(1) (the single entity rule) applies when the joining entity becomes a *subsidiary member of the group; and
 (d) the revenue etc. asset's *tax cost setting amount (after any application of section 705‑40, 705‑45 or 705‑47) exceeds the joining entity's *terminating value for the asset.

Loss of pre‑CGT status because Division 149 etc. applied while interest held by