Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 705.160

Object

  (1)   The object of this section is to prevent a distortion under section   705 - 35 in the allocation of * allocable cost amount to an entity that becomes a * subsidiary member of the group where that entity has direct or indirect * membership interests in another entity that has certain profits or tax losses when it becomes a subsidiary member.

Adjustment to allocation of allocable cost amount where direct interest in entity with profits/losses

  (2)   If:

  (a)   an entity becomes a * subsidiary member of the group at the formation time; and

  (b)   the entity has * membership interests in a second entity that becomes a subsidiary member of the group at that time; and

  (c)   in working out the group's * allocable cost amount for the second entity:

  (i)   an amount is required to be added (the second entity's profit/loss adjustment amount ) under step 3 in the table in section   705 - 60 (about profits accruing before becoming a subsidiary member of the group); or

  (ii)   an amount is required to be subtracted (also the second entity's profit/loss adjustment amount ) under step 5 in the table in section   705 - 60 (about losses accruing before becoming a subsidiary member of the group); or

  (iii)   an amount is required to be subtracted (also the second entity's profit/loss adjustment amount ) under step 5A in the table in section   705 - 60 (about * FRT disallowed amounts accruing to a joined group before the joining time);

then, for the purposes of working out under section   705 - 35 the * tax cost setting amount for the assets of the first entity, the * market value of the first entity's membership interests in the second entity is reduced (in a subparagraph   (c)(i) case) or increased (in a subparagraph   (c)(ii) or (iii) case) by the first entity's interest in the second entity's profit/loss adjustment amount (see subsection   (3)).

First entity's interest in second entity's profit/loss adjustment amount

  (3)   The first entity's interest in the second entity's profit/loss adjustment amount is worked out using the formula:

Adjustment to allocation of allocable cost amount for indirect interest in entity with profits/losses

  (4)   If:

  (a)   an entity becomes a * subsidiary member of the group at the formation time; and

  (b)   the entity has * membership interests in a second entity that becomes a subsidiary member of the group at that time; and

  (c)   the second entity has, directly or indirectly through one or more interposed entities that become subsidiary members of the group at the formation time, membership interests in a third entity that becomes a subsidiary member of the group at that time; and

  (d)   in working out the group's * allocable cost amount for the third entity:

  (i)   an amount is required to be added (the third entity's profit/loss adjustment amount ) under step 3 in the table in section   705 - 60 (about profits accruing before becoming a subsidiary member of the group); or

  (ii)   an amount is required to be subtracted (also the third entity's profit/loss adjustment amount ) under step 5 in the table in section   705 - 60 (about losses accruing before becoming a subsidiary member of the group); or

  (iii)   an amount is required to be subtracted (also the third entity's profit/loss adjustment amount ) under step 5A in the table in section   705 - 60 (about * FRT disallowed amounts accruing to a joined group before the joining time);

then, for the purposes of working out under section   705 - 35 the * tax cost setting amount for the assets of the first entity, the * market value of the first entity's membership interests in the second entity is reduced (in a subparagraph   (d)(i) case) or increased (in a subparagraph   (d)(ii) or (iii) case) by the first entity's interest in the third entity's profit/loss adjustment amount (see subsection   (5)).

First entity's interest in third entity's profit/loss adjustment amount

  (5)   The first entity's interest in the third entity's profit/loss adjustment amount is worked out using the formula:

where:

"market value of first entity's membership interests in third entity held through second entity" means the * market value of all * membership interests in the third entity that the first entity holds indirectly through the second entity (including through that entity and one or more other entities that become * subsidiary members of the group and are interposed between the second entity and the third entity).