Document ID: chunk:federal_register_of_legislation:C2025C00029:section:5:p4
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 5 (pt 4/13)
Character Range: 6095142–6097877

with the leaving entity's *accounting principles for tax cost setting.
 (1C) Subsection (1B) does not apply to an accounting liability that relates to an asset mentioned in paragraph 713‑575(2)(a) or (b) (certain assets of life insurance company).

Exclusion where transfer of accounting liability
 (2) An amount is not to be added for an accounting liability that arises because of the leaving entity's ownership of an asset if, on *disposal of the asset, the accounting liability will transfer to the new owner.
Example: A liability to rehabilitate a mine site, where, under legislation or a licence, the liability will be transferred to the new owner on disposal of the mine.

Exclusion where liability is obligation to make lease payments
 (2A) An amount is not to be added for an accounting liability that is the leaving entity's obligation as lessee to make lease payments under a lease, if:
 (a) subsection 705‑56(4) applied in relation to the liability, at a time when an entity (whether the leaving entity or another entity) became a *subsidiary member of the old group; and
 (b) the liability was not taken into account under subsection 705‑70(1) at that time, because of paragraph 705‑56(4)(b).

Reduction for future deduction
 (3) If some or all of an accounting liability will result in a deduction to the leaving entity, the amount to be added for the accounting liability is reduced by the following amount:
where:
double‑counting adjustment means the amount of any reduction that has already occurred in the accounting liability under subsection (1) to take account of the future availability of the deduction.

Amount for intra‑group liabilities
 (4) If an accounting liability of the leaving entity is owed to a *member of the old group, the amount to be added for the liability is the *tax cost setting amount of the corresponding asset of the member.

Adjustment for unrealised gains and losses
 (5) If, for income tax purposes, an accounting liability, or a change in the amount of an accounting liability, (other than one owed to a *member of the old group) is taken into account at a later time than is the case in accordance with the leaving entity's *accounting principles for tax cost setting, the amount to be added for the accounting liability is equal to the payment that would be necessary to discharge the liability just before the leaving time without an amount being included in the assessable income of, or allowable as a deduction to, the *head company.
Note: An example is accrued employee leave entitlements or foreign exchange gains and losses.

Increase in step 4 amount for employee share interests
 (6) If any *membership interest (an employee share interest) in the leaving entity needed to be