Document ID: chunk:federal_register_of_legislation:C2010C00690:clause:1_2:p5
Version: federal_register_of_legislation:C2010C00690
Segment Type: clause
Provision Reference: sch 1 cl 2 (pt 5/11)
Character Range: 12205–14777

requirements to be a subsidiary member; or

(b) the head company ceases to satisfy the requirements to be a head company (thereby bringing the group to an end).

Object

 (2) The object of this section is to preserve the alignment of the *head company's costs for *membership interests in each entity and its assets by recognising, when an entity ceases to be a *subsidiary member of the group, the cost of those interests as an amount equal to the cost of the entity's assets at that time reduced by the amount of its liabilities.

Note: The head company's costs for membership interests in entities was aligned with the costs of their assets when the entities became subsidiary members of the group.

Setting tax cost of membership interests

 (3) For each *membership interest that the *head company of the group holds in an entity that ceases to be a *subsidiary member, the interest's *tax cost is set just before the entity ceases to be a subsidiary member at the interest's *tax cost setting amount.

Note: The membership interests would include those that are actually held by subsidiary members of the group, but which are treated as those of the head company under the single entity rule.

701‑20  Cost to head company of assets consisting of certain liabilities owed by entity that leaves group

 (1) If the entity ceases to be a *subsidiary member of the group, this section has effect for the head company core purposes, so far as they relate to the income year in which the entity ceases to be a subsidiary member or any later income year.

Assets to which section applies

 (2) This section applies in relation to each asset, consisting of a liability owed by the entity, that becomes an asset of the *head company because subsection 701‑1(1) (the single entity rule) ceases to apply to the entity when it ceases to be a *subsidiary member. This is a liability that, ignoring that subsection, is owed to a *member of the group.

Object

 (3) The object of this section is to set a cost for the asset to enable income tax consequences for the *head company in respect of the asset to be determined.

Setting tax cost of assets

 (4) The asset's *tax cost is set at the time the entity ceases to be a *subsidiary member of the group at the asset's *tax cost setting amount.

701‑25  Tax‑neutral consequence for head company of ceasing to hold assets when entity leaves group

 (1) If the entity ceases to be a *subsidiary member of the group, this section has effect for the head company core purposes, so far as they relate to the income year in which