Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 705.27

  (1)   If:

  (a)   a * retained cost base asset of the joining entity is a right to receive a specified amount of such Australian currency, covered by paragraph   705 - 25(5)(b); and

  (b)   the * market value of the asset is less than the * tax cost setting amount of the asset; and

  (c)   the head company makes a * capital gain under * CGT event L3 (disregarding this subsection) as a result of the joining entity becoming a * subsidiary member of the group;

reduce the tax cost setting amount of the asset by the amount of the gain (but not below zero).

Note:   Reducing the tax cost setting amount of the asset will also reduce the amount of the capital gain (see paragraph   104 - 510(1)(b)). The amount of the capital gain might be reduced to nil.

  (2)   If:

  (a)   the requirements in subsection   701 - 58(1) (intra - group assets) are satisfied in relation to the asset; and

  (b)   the joining entity has been entitled to a deduction for an income year ending on or before the joining time because of the * market value of the asset being less than the specified amount mentioned in paragraph   (1)(a); and

  (c)   the accounting liability that corresponds to the asset has not been reduced under subsection   705 - 75(2);

reduce the amount of the reduction under subsection   (1) by the amount of the deduction (but not below zero).

  (3)   If the * tax cost setting amount of 2 or more of the joining entity's assets could be reduced in accordance with subsections   (1) and (2):

  (a)   subsections   (1) and (2) apply sequentially to each of those assets; and

  (b)   the * head company may choose the sequence of assets to which subsections   (1) and (2) apply; and

  (c)   if the head company does not make such a choice--subsections   (1) and (2) apply sequentially to each of those assets according to the time at which they were created, from earliest to latest.

Note:   Once the amount of the capital gain is reduced to nil as a result of the application of subsections   (1) and (2), no further reductions of tax cost setting amount can be made under those subsections.

  (4)   A choice the * head company can make under paragraph   (3)(b) must be made:

  (a)   by the day the head company lodges its * income tax return for the income year in which the * CGT event happened; or

  (b)   within a further time allowed by the Commissioner.

  (5)   The way the * head company prepares its * income tax return is sufficient evidence of the making of the choice.