Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 715.70

  (1)   At the time (the formation time ) when an entity becomes a * subsidiary member of a * consolidated group, a loss denial pool of the * head company of the group is created if:

  (a)   the formation time is not a * changeover time for the head company; and

  (b)   the entity is a chosen transitional entity under Division   701 of the Income Tax (Transitional Provisions) Act 1997 ; and

  (c)   subsection   (2) or (4) of this section is satisfied.

Note 1:   If the entity is a chosen transitional entity, section   701 - 15 of the Income Tax (Transitional Provisions) Act 1997 prevents:

•   section   701 - 10 (cost to head company of assets of joining entity); and

•   subsection   701 - 35(4) (setting value of trading stock at tax - neutral amount);

  of this Act from applying to the entity's assets in relation to the formation time.

Note 2:   The pool is distinct from any other loss denial pool of the head company, for example, one created under this section because another entity becomes a subsidiary member of the group at the formation time.

Joining entity has 165 - CC tagged assets

  (2)   This subsection is satisfied if:

  (a)   a * CGT asset of the entity, or each of 2 or more CGT assets of the entity:

  (i)   is a * 165 - CC tagged asset of the entity at the formation time; and

  (ii)   was owned by the entity at the * changeover time; and

  (iii)   is not a * membership interest in a * member of the group; and

  (iv)   is not a right or option (including a contingent right or option), created or issued by a member of the group, to acquire such a membership interest; and

  (v)   is not constituted by a liability owed to the entity by a member of the group at the formation time; and

  (b)   the entity's * final RUNL just before the formation time (as reduced by any reductions under section   715 - 50 or 715 - 55) was greater than nil; and

  (c)   the entity does not satisfy the * business continuity test for:

  (i)   the period (the business continuity test period ) consisting of the entity's * trial year; and

  (ii)   the time (the test time ) just before the * changeover time.

Note:   Paragraph   (2)(b) has the effect that if the entity has 165 - CC tagged assets that are affected by section   715 - 50 or 715 - 55 (because they are membership interests in, or accounting liabilities owed by, another group member), those sections are applied before this section.

  (3)   When it is created because of subsection   (2), the pool consists of the one or more * CGT assets referred to in paragraph   (2)(a), and its loss denial balance is equal to the * final RUNL referred to in paragraph   (2)(b).

Note:   170 - D deferred losses on 165 - CC tagged assets of the head company may be added to the pool by subsection   715 - 355(2).

Entity has loss denial pool

  (4)   This subsection is satisfied if, just before the formation time, the entity had a * loss denial pool.

  (5)   When it is created because of subsection   (4), the * head company's loss denial pool:

  (a)   consists of the one or more * CGT assets of which the entity's loss * denial pool consisted; and

  (b)   has a loss denial balance equal to the * loss denial balance of the entity's loss denial pool;

just before the formation time.