Document ID: chunk:federal_register_of_legislation:C2010C00604:clause:4_2:p1
Version: federal_register_of_legislation:C2010C00604
Segment Type: clause
Provision Reference: sch 4 cl 2 (pt 1/2)
Character Range: 47667–50464

2  After Subdivision 705‑D
Insert:

Subdivision 705‑E—Adjustments for errors etc.

Guide to Subdivision 705‑E

705‑300  What this Subdivision is about

      Errors in making tax cost setting amount calculations are reversed by means of an immediate capital gain or loss if it would be unreasonable to require the calculations to be re‑done.

Table of sections

Operative provisions

705‑305 Object of this Subdivision
705‑310 Operation of Part IVA of the Income Tax Assessment Act 1936
705‑315 Errors that attract special adjustment action
705‑320 Tax cost setting amounts taken to be correct

[This is the end of the Guide.]

Operative provisions

705‑305  Object of this Subdivision

  The object of this Subdivision is to avoid the time and expense involved in correcting errors affecting *tax cost setting amount calculations. This is done by providing for *capital gains or *capital losses to reverse the errors.

705‑310  Operation of Part IVA of the Income Tax Assessment Act 1936

  To avoid doubt, this Subdivision does not limit the operation of Part IVA of the Income Tax Assessment Act 1936.

705‑315  Errors that attract special adjustment action

 (1) Section 705‑320 (about later adjustments to correct *tax cost setting amount calculation errors) applies if the conditions in this section are satisfied.

Tax cost setting amount taken into account

 (2) The first condition is that the *head company of a *consolidated group worked out a *tax cost setting amount, in purported compliance with this Division, for an asset of an entity that becomes a *subsidiary member of the group that is an asset of a kind referred to in section 705‑35 as a reset cost base asset.

Error in calculation

 (3) The second condition is that:
 (a) the *head company made one or more errors in working out the *tax cost setting amount; and
 (b) those errors caused the tax cost setting amount to differ from its correct amount.
If the errors caused the tax cost setting amount to be more, the difference is an overstated amount. If the errors caused the tax cost setting amount to be less, the difference is an understated amount.

Unreasonable to require recalculation

 (4) The third condition is that, having regard to the following factors:
 (a) the net size of the errors compared to the size of the *allocable cost amount for the joining entity;
 (b) the number of *tax cost setting amounts that would have to be recalculated, and the difficulty of making the recalculations;
 (c) the number of adjustments, in assessments that could be amended and in future *income tax returns, that would be necessary to correct the errors;
 (d) the difficulty in obtaining any necessary information;
it is not reasonable to require a recalculation of the amounts involved.

Exception where error