Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p26
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 26/45)
Character Range: 5973484–5976233

interest in an entity that becomes a *subsidiary member at the linked entity joining time; and
 (b) the rollover asset is not held at that time by the entity that becomes the *head company of the group.
Note: The step 3A amount is worked out under section 705‑93.

705‑230  Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests

Object
 (1) The object of this section is to ensure that, in working out the group's *allocable cost amount for the linked entities, the reduction under step 4 in the table in section 705‑60 (about pre‑formation time distributions out of certain profits) is made only for profits that have been effectively distributed to the *head company in respect of its direct *membership interests in the entities. This ensures consistency with the ordering rule in section 705‑225.

When section applies
 (2) This section applies to a distribution to the extent that the following conditions are satisfied:
 (a) the distribution is made by a linked entity;
 (b) in working out the group's *allocable cost amount for the linked entity there would, apart from this section, be a reduction under step 4 in the table in section 705‑60 for the distribution.

Step 4 reduction only if subject distribution is made to head company
 (3) There is no reduction as mentioned in subsection (2) for the distribution unless it is made to the *head company of the group.

705‑235  Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain linked entities

Object
 (1) The object of this section is to prevent a distortion under section 705‑35 in the allocation of *allocable cost amount to a linked entity where that entity has direct or indirect *membership interests in another linked entity that has certain profits or tax losses.

Adjustment to allocation of allocable cost amount where direct interest in linked entity with profits/losses
 (2) If:
 (a) a linked entity has *membership interests in a second linked entity; and
 (b) in working out the group's *allocable cost amount for the second linked entity:
 (i) an amount is required to be added (the second linked entity's profit/loss adjustment amount) under step 3 in the table in section 705‑60 (about profits accruing before becoming a subsidiary member of the group); or
 (ii) an amount is required to be subtracted (also the second linked entity's profit/loss adjustment amount) under step 5 in the table in section 705‑60 (about losses accruing before becoming a subsidiary member of the group); or
 (iii) an amount is required to be subtracted (also the second linked entity's profit/loss adjustment amount) under step 5A in the table