Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) The object of this section is to clarify the effect of section 701 - 5 (entry history rule) and subsection 701 - 55(6) in relation to an asset that may give rise to a bad debt. It achieves this object by clarifying that certain things are taken to have happened in relation to the asset through the operation of section 701 - 5 and subsection 701 - 55(6).
(2) This section applies if:
(a) the tax cost of an asset was set at the time (the joining time ) an entity (the joining entity ) became a subsidiary member of a * consolidated group at the asset's tax cost setting amount; and
(b) the asset is a debt; and
(c) any of the following apply:
(i) the debt was included in the joining entity's assessable income before the joining time;
(ii) the debt was in respect of money that the joining entity lent before the joining time in the ordinary course of a business of lending money;
(iii) the joining entity bought the debt before the joining time in the ordinary course of a business of lending money; and
(d) the requirements in subsection 701 - 58(1) (intra - group assets) are not satisfied in relation to the asset.
(3) To avoid doubt, in determining the extent to which the * head company of the group can deduct an amount under section 25 - 35 (bad debts) in relation to the asset, section 701 - 5 (entry history rule) and subsection 701 - 55(6) have the effect that, before the joining time:
(a) in a case covered by subparagraph (2)(c)(i)--the head company included an amount equal to the tax cost setting amount in its assessable income in respect of the debt; or
(b) in a case covered by subparagraph (2)(c)(ii)--the head company lent an amount of money in respect of the debt equal to the tax cost setting amount in the ordinary course of a business of lending money; or
(c) in a case covered by subparagraph (2)(c)(iii)--the head company incurred expenditure equal to the tax cost setting amount in buying the debt in the ordinary course of a business of lending money.