Document ID: chunk:federal_register_of_legislation:C2010C00605:clause:3_1:p1
Version: federal_register_of_legislation:C2010C00605
Segment Type: clause
Provision Reference: sch 3 cl 1 (pt 1/3)
Character Range: 42232–44988

1  After section 705‑55
Insert:

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 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 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 705‑50) exceeds the joining entity's *terminating value for the asset.

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

 (3) The first circumstance for the purpose of paragraph (2)(a) is where Division 149 of this Act, subsection 160ZZS(1) of the Income Tax Assessment Act 1936 or Subdivision C of Division 20 of Part IIIA of that Act applied to cause the *membership interest to stop being a *pre‑CGT asset while the *member held the membership interest.

Loss of pre‑CGT status because Division 149 etc. applied before current holding by member

 (4) The second circumstance for the purpose of paragraph (2)(a) is where:
 (a) either:
 (i) the *member *acquired the *membership interest directly from another entity; or
 (ii) the member acquired the membership interest indirectly from another entity or from itself as a result of 2 or more acquisitions; and
 (b) Division 149 of this Act, subsection 160ZZS(1) of the Income Tax Assessment Act 1936 or Subdivision C of Division 20 of Part IIIA of that Act applied to cause the membership interest to stop being a *pre‑CGT asset while the other entity held the membership interest or while the member held the membership interest