Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p18
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 18/45)
Character Range: 5953127–5955919

to the subject membership interest as follows.
 (4) First work out whether there would be a reduction under that section in the *tax cost setting amount for the subject membership interest that is used as mentioned in subsection 705‑145(3) (the subsection 705‑145(3) tax cost setting amount) if:
 (a) the subject membership interest, if it is not a revenue etc. asset of the first entity, were taken to be such an asset; and
 (b) paragraphs 705‑57(2)(c) and (d) and subsection 705‑57(7) did not apply to the subject membership interest.
 (5) Next, if there would be such a reduction (whose amount is the notional section 705‑57 reduction amount):
 (a) apply section 705‑57 to reduce the *tax cost setting amount for any revenue etc. asset of the second entity; and
 (b) if the second entity holds a *membership interest in another entity that becomes a *subsidiary member—apply section 705‑57 in relation to that interest in accordance with subsection (3) of this section;
and for those purposes:
 (c) the subject membership interest is taken to be a membership interest that the *head company of the group holds directly in the second entity at the formation time; and
 (d) the requirements of paragraphs 705‑57(2)(a) and (b) are taken to be satisfied in relation to the subject membership interest; and
 (e) the subject membership interest is taken to have a *cost base and *reduced cost base equal to the subsection 705‑145(3) tax cost setting amount; and
 (f) the subject membership interest is taken to have a loss of pre‑CGT status adjustment amount equal to the notional section 705‑57 reduction amount.
Note: If the head company actually held any membership interests in the second entity, or if other entities becoming subsidiary members held membership interests in the second entity to which this subsection also applied, those membership interests would also be taken into account in working out the reduction under paragraph (a) and in applying paragraph (b).

Section 705‑57 not to apply where membership interests effectively acquired on normal market basis
 (6) If:
 (a) apart from this subsection, subsection 705‑57(6) would apply in accordance with this Subdivision to the revenue etc. assets of an entity (the subject entity) that becomes a *subsidiary member of the group at the formation time; and
 (b) at the formation time, the *head company of the group holds all of the *membership interests in the subject entity; and
 (c) subsection 705‑57(6) would apply because a circumstance covered by subsection 705‑57(4) (about loss of pre‑CGT status because Division 149 etc. applied) existed; and
 (d) the application of Division 149 of this Act, or the provision of the Income Tax Assessment Act 1936, as mentioned in paragraph 705‑57(4)(b) of this Act happened because the