Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p11
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 11/19)
Character Range: 5861252–5863843

the joining entity's reset cost base assets in proportion to their *market values.
Note 1: For an asset consisting of an entitlement to receive an amount that will be included in assessable income, the market value of the asset would take into account the tax payable on the amount.
Note 1A: If a set of linked assets and liabilities includes one or more reset cost base assets, section 705‑59 may affect how this section applies. In particular, that section may exclude the application of paragraph 705‑35(1)(b) to retained cost base assets in the set; this in turn may affect the application of CGT event L3.
Note 2: If there are no reset cost base assets, the result is instead treated as a capital loss of the head company: see CGT event L4.

Goodwill resulting from ownership and control of the joining entity
 (3) If, just after the joining time, the *head company has, because of its ownership and control of the joining entity, a goodwill asset associated with assets or businesses of the joined group:
 (a) for the head company core purposes, the asset's *tax cost is set at the joining time at its *tax cost setting amount; and
 (b) for the purpose of doing so:
 (i) the asset is taken to be an asset of the joining entity that becomes an asset of the head company because subsection 701‑1(1) (the single entity rule) applies; and
 (ii) it is taken to have a *market value just before the joining time of an amount equal to its market value just after the joining time.

705‑40  Tax cost setting amount for reset cost base assets held on revenue account etc.
 (1) The *tax cost setting amount for a reset cost base asset that is *trading stock, a *depreciating asset, a *registered emissions unit or a *revenue asset must not exceed the greater of:
 (a) the asset's *market value; and
 (b) the joining entity's *terminating value for the asset.
 (2) If subsection (1) reduces the asset's *tax cost setting amount, the amount of the reduction is allocated among the other reset cost base assets (including other *trading stock, *depreciating assets, *registered emissions units and *revenue assets), so as to increase their tax cost setting amounts, in accordance with the principles set out in subsection (3).
Note: If any of the amount of the reduction cannot be allocated, it is instead treated as a capital loss of the head company: see CGT event L8.
 (3) These are the principles:
 (a) the allocation is to be in proportion to the *market values of the assets;
 (b) the amount allocated to an item of *trading stock, to a *depreciating asset, to a *registered emissions unit or