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 5/45)
Character Range: 5920511–5923153

was previously a *subsidiary member of a *consolidated group, any income year earlier than the one that started, or, if section 701‑30 applies, the one that is taken by subsection (3) of that section to have started, when the joining entity ceased to be a subsidiary member of that group is excluded for the purposes of paragraph (4)(b) of this section.

Undistributed profits must have accrued to joined group
 (6) Next, work out the extent to which the undistributed profits that satisfy the requirements of subsection (3) accrued to the joined group before the joining time (subsection (7) states what it means for a profit to accrue to the joined group before the joining time). The result is the step 3 amount.

Profit accruing to the joined group before the joining time
 (7) A profit accrued to the joined group before the joining time if, on the following assumptions:
 (a) that it was distributed to holders of *membership interests as it accrued; and
 (b) that entities interposed between the *head company and the joining entity successively distributed any of it immediately after receiving it;
it would have been received by the entity that is the head company at the joining time, in respect of membership interests that it held continuously until that time either directly or indirectly through interposed entities.
Note: If an entity interposed between the head company and the joining entity is a non‑fixed trust, this subsection may involve determining how a power of appointment would have been exercised. Section 713‑50 lists matters to have regard to in determining this.

Loss accruing to the joined group before the joining time
 (8) A loss accrued to the joined group before the joining time if and to the extent that, assuming that as it arose it were instead a profit that was accruing, a distribution of that profit would have been a distribution made to the joined group out of profits that accrued to the joined group before the joining time.

Use of reliable estimates
 (9) In working out:
 (a) for the purposes of subsection (4), the amount of income tax, or refund of income tax, on the joining entity's taxable income for a particular income year and the extent to which it has not yet been paid; or
 (b) for the purposes of subsection (7), the amount of a profit that accrued to the joined group during a particular period; or
 (c) for the purposes of subsection (8), the amount of a loss that accrued to the joined group during a particular period;
use the most reliable basis for estimation that is available.
 (10) Without limiting paragraph (9)(b), a way in which, for the purposes of subsection (7), the