Document ID: chunk:federal_register_of_legislation:C2025C00029:section:2:p5
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 2 (pt 5/66)
Character Range: 6338183–6340872

income year (the leaving year); and
 (b) under section 701‑40 (Exit history rule), expenditure is taken to have been allocated by the leaving entity to a software development pool.
Note: Section 701‑40 treats expenditure incurred by the head company of the consolidated group and allocated by that company to a software development pool as having been incurred by the leaving entity and allocated by it to a software development pool.
 (2) Work out deductions of the *head company of the *consolidated group for income years after the leaving year as if the head company had not incurred the expenditure.
 (3) The leaving entity cannot deduct an amount for the leaving year for the expenditure it is taken to have allocated to the software development pool.

Subdivision 716‑S—Miscellaneous consequences of tax cost setting

Table of sections
716‑400 Tax cost setting and bad debts
716‑440 Membership interests in joining entity not subject to CGT under Division 855—foreign entity ceasing to hold interests

716‑400  Tax cost setting and bad debts
 (1) The object of this section is to clarify the effect of section 701‑5 (entry history rule) and subsection 701‑55(6) in relation to an asset that may give rise to a bad debt. It achieves this object by clarifying that certain things are taken to have happened in relation to the asset through the operation of section 701‑5 and subsection 701‑55(6).
 (2) This section applies if:
 (a) the tax cost of an asset was set at the time (the joining time) an entity (the joining entity) became a subsidiary member of a *consolidated group at the asset's tax cost setting amount; and
 (b) the asset is a debt; and
 (c) any of the following apply:
 (i) the debt was included in the joining entity's assessable income before the joining time;
 (ii) the debt was in respect of money that the joining entity lent before the joining time in the ordinary course of a business of lending money;
 (iii) the joining entity bought the debt before the joining time in the ordinary course of a business of lending money; and
 (d) the requirements in subsection 701‑58(1) (intra‑group assets) are not satisfied in relation to the asset.
 (3) To avoid doubt, in determining the extent to which the *head company of the group can deduct an amount under section 25‑35 (bad debts) in relation to the asset, section 701‑5 (entry history rule) and subsection 701‑55(6) have the effect that, before the joining time:
 (a) in a case covered by subparagraph (2)(c)(i)—the head company included an amount equal to the tax cost setting amount in its assessable income in respect of the debt; or
 (b) in a case covered by subparagraph (2)(c)(ii)—the head company lent an