Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1997
1 Section 719 - 155
Repeal the section, substitute:
719 - 155 Object of this Subdivision
The object of this Subdivision is to modify the tax cost setting rules in Divisions 701 and 705 so that they take account of the special characteristics of * MEC groups.
2 Before subsection 719 - 160(1)
Insert:
(1A) This section applies if an entity (the MEC joining entity ) becomes a * subsidiary member of a * MEC group at a time (the MEC joining time ).
3 Section 719 - 165
Repeal the section, substitute:
719 - 165 Trading stock value not set for assets of eligible tier - 1 companies
(1) This section applies if an entity (the MEC joining entity ) becomes a * subsidiary member of a * MEC group at a time (the MEC joining time ).
(2) Subsection 701 - 35(4) (setting value of trading stock at tax - neutral amount) does not apply to the assets of the MEC joining entity if it is an * eligible tier - 1 company at the MEC joining time.
4 At the end of Subdivision 719 - C
Add:
719 - 170 Modified effect of subsections 705 - 175(1) and 705 - 185(1)
(1) This section applies if all of the * members of a * MEC group (the acquired group ) become members of another MEC group, or of a * consolidated group, at a particular time (the acquisition time ) as a result of the * acquisition of * membership interests in:
(a) the * head company of the acquired group; and
(b) other entities that were * eligible tier - 1 companies of the acquired group just before the acquisition time.
(2) Subsections 705 - 175(1) and 705 - 185(1) have effect as if a * membership interest in an entity mentioned in paragraph ( 1)(b) of this section were a membership interest in the * head company of the acquired group.
Note 1: If the acquiring group is a MEC group, and the head company of the acquired group becomes an eligible tier - 1 company of the acquiring group, the assets of the members of the acquired group do not have their tax cost reset at the acquisition time. This is because:
(a) section 719 - 160 treats an entity becoming an eligible tier - 1 company of the acquiring group as if it were a part of the head company of that group; and
(b) section 705 - 185 treats the subsidiary members of the acquired group as part of the head company of the acquired group.
Note 2: If:
(a) the acquiring group is a MEC group, but the head company of the acquired group does not become an eligible tier - 1 company of the acquiring group; or
(b) the acquiring group is a consolidated group and the acquired group is a MEC group ;
the assets of the members of the acquired group have their tax cost reset at the acquisition time ( section 719 - 160 does not preclude tax cost resetting in these cases). For the purposes of resetting the tax cost of those assets, section 705 - 185 treats the subsidiary members of the acquired group as part of the head company of the acquired group.