Document ID: chunk:federal_register_of_legislation:C2025C00029:section:3:p5
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 3 (pt 5/19)
Character Range: 5846564–5849472

entity—step 1 in working out allocable cost amount
705‑70 Liabilities of the joining entity—step 2 in working out allocable cost amount
705‑75 Liabilities of the joining entity—reductions for purposes of step 2 in working out allocable cost amount
705‑76 Liability arising from transfer or assignment of securitised assets
705‑80 Liabilities of the joining entity—reductions/increases for purposes of step 2 in working out allocable cost amount
705‑85 Liabilities of the joining entity—increases for purposes of step 2 in working out allocable cost amount
705‑90 Undistributed, taxed profits accruing to joined group before joining time—step 3 in working out allocable cost amount
705‑93 If pre‑joining time roll‑over from foreign resident company or head company—step 3A in working out allocable cost amount
705‑95 Pre‑joining time distributions out of certain profits—step 4 in working out allocable cost amount
705‑100 Losses accruing to joined group before joining time—step 5 in working out allocable cost amount
705‑102 FRT disallowed amounts accruing to joined group before joining time—step 5A in working out allocable cost amount
705‑105 Continuity of holding membership interests—steps 3 to 5A in working out allocable cost amount
705‑110 If joining entity transfers a loss to the head company—step 6 in working out allocable cost amount
705‑112 If joining entity transfers a FRT disallowed amount to the head company—step 6A in working out allocable cost amount
705‑115 If head company becomes entitled to certain deductions—step 7 in working out allocable cost amount

How to work out a pre‑CGT factor for assets of joining entity
705‑125 Pre‑CGT proportion for joining entity

Application and object

705‑10  Application and object of this Subdivision

Application
 (1) This Subdivision has effect, subject to section 705‑15, for the head company core purposes set out in subsection 701‑1(2) if an entity (the joining entity) becomes a *subsidiary member of a *consolidated group (the joined group) at a particular time (the joining time).

Object
 (2) The object of this Subdivision is to recognise the *head company's cost of becoming the holder of the joining entity's assets as an amount reflecting the group's cost of acquiring the entity. That amount consists of the cost of the group's *membership interests in the joining entity, increased by the joining entity's liabilities and adjusted to take account of the joining entity's retained profits, distributions of profits, deductions and losses.
 (3) The reason for recognising the *head company's cost in this way is to align the costs of assets with the costs of *membership interests, and to allow for the preservation of this alignment until the entity ceases to be a *subsidiary member, in order to:
 (a) prevent double taxation of gains and duplication of losses; and
 (b) remove the need to adjust costs of membership interests in