Document ID: chunk:federal_register_of_legislation:C2010C00605:clause:4_4:p6
Version: federal_register_of_legislation:C2010C00605
Segment Type: clause
Provision Reference: sch 4 cl 4 (pt 6/10)
Character Range: 73894–76669

of the group then acquire all the membership interests in entity A and as a result of this event both entities, which are linked by the membership interests that one holds in the other, become members of the group.

Object

 (2) The object of this Subdivision is to modify the rules in Subdivision 705‑A (which basically determine the tax cost setting amount for assets of an entity joining an existing consolidated group) so that they take account of the different circumstances that apply where linked entities join.

Modified application of Subdivision 705‑A

705‑220  Subdivision 705‑A has effect with modifications

 (1) Subdivision 705‑A has effect in relation to each linked entity becoming a *subsidiary member of the *consolidated group in the same way as that Subdivision operates in relation to an entity becoming a subsidiary member of a consolidated group in circumstances covered by that Subdivision.

 (2) However, that effect of Subdivision 705‑A is subject to modifications set out in this Subdivision.

705‑225  Order in which tax cost setting amounts are to be worked out where linked entities have membership interests in other linked entities

Object

 (1) The object of this section is to ensure that where, on becoming *subsidiary members, linked entities hold assets consisting of *membership interests in other linked entities, the *head company's cost of becoming the holder of the assets of all of the linked entities correctly reflects the group's cost of acquiring the linked entities.

Tax cost setting amounts to be worked out from top down

 (2) The *tax cost setting amounts for the assets of linked entities holding *membership interests must be worked out before the tax cost setting amounts for the assets of the linked entities in which the membership interests are held.

Note: The tax cost setting amount in respect of assets of any linked entity in which members of the group, but no linked entity, hold membership interests can be worked out in any order in relation to the calculations for other linked entities.

Tax cost setting amount for higher linked entity's membership interests to be used in working out lower linked entity's tax cost setting amount

 (3) The *tax cost setting amount worked out for assets of a linked entity mentioned in subsection (2) consisting of *membership interests in another such entity is to be used as the amount for those interests under subsection 705‑65(1) (step 1 of allocable cost amount) in working out the tax cost setting amount for assets of that other linked entity.

Note 1: Subsection 705‑65(1) adds together amounts worked out in accordance with section 705‑65 representing the cost of the membership interests that each member of the group holds in the linked entity. If any of