Commonwealth Consolidated Acts Commonwealth Consolidated Acts
Income Tax Assessment Act 1997
1 Paragraph 715 - 375(1)(b)
After "of the joining entity at the joining time", insert "(disregarding subsection 701 - 1(1) (the single entity rule))".
2 Paragraph 715 - 375(1)(c)
Repeal the paragraph, substitute:
(c) the accounting liability is or is part of a * Division 230 financial arrangement of the head company at the joining time (because of subsection 701 - 1(1) (the single entity rule)).
3 Subsections 715 - 375(2), (3) and (4)
Repeal the subsections, substitute:
(2) For the purposes of Division 230 and Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 , treat the * head company of the group as starting to have the accounting liability at the joining time for receiving a payment equal to:
(a) if the liability is or is part of a * Division 230 financial arrangement of the head company at the joining time (because of subsection 701 - 1(1) (the single entity rule)):
(i) to which Subdivision 230 - B (accruals method or realisation method) applies; or
(ii) to which Subdivision 230 - E (hedging financial arrangements method) applies;
the amount of the liability, as determined in accordance with:
(iii) the joining entity's * accounting principles for tax cost setting; or
(iv) if the amount of the liability cannot be determined in accordance with the joining entity's accounting principles for tax cost setting -- comparable standards for accounting made under a * foreign law; or
(b) otherwise--the liability's * Division 230 starting value at the joining time.
4 After section 715 - 375
Insert:
715 - 378 Cost setting--head company's right to receive or obligation to provide payment
(1) This section applies in relation to an asset or a liability if:
(a) an entity (the joining entity ) becomes a subsidiary member of a consolidated group at a time (the joining time ); and
(b) the asset or liability becomes that of the head company of the group because subsection 701 - 1(1) (the single entity rule) applies at the joining time; and
(c) in the case of an asset--subsection 701 - 55(5A) applies in relation to the asset at the joining time; and
(d) in the case of a liability--subsection 715 - 375(2) applies in relation to the liability at the joining time.
(2) In the case of an asset, for the purposes of section 230 - 60, assume that the * head company of the group acquired the asset at the joining time (as mentioned in subsection 701 - 55(5A)) in return for the head company starting to have an obligation to provide the payment mentioned in that subsection.
(3) In the case of a liability, for the purposes of section 230 - 60, assume that the * head company of the group started to have the liability at the joining time (as mentioned in subsection 715 - 375(2)) in return for the head company starting to have a right to receive the payment mentioned in that subsection .
Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009
5 After item 104 of Schedule 1
Insert:
104B Asset or liability of entity joining pre - TOFA consolidated group etc.
(1) This item applies in relation to an asset or liability if:
(a) an entity (the joining entity ) becomes a subsidiary member of a consolidated group or MEC group at a time (the joining time ); and
(b) the asset or liability becomes that of the head company of the group because subsection 701 - 1(1) of the Income Tax Assessment Act 1997 (the single entity rule) applies when the joining entity becomes a subsidiary member of the group; and
(c) the asset or liability is, or is part of, a financial arrangement at the start of the head company's first applicable income year; and
(d) the head company's first applicable income year starts after the joining time; and
(e) the head company has the asset or liability (whether or not because of subsection 701 - 1(1) of the Income Tax Assessment Act 1997 (the single entity rule)) throughout the period:
(i) starting at the joining time; and
(ii) ending at the start of the head company's first applicable income year; and
(f) the head company elects to have subitem 104(2) apply to itself; and
(g) the joining entity is not a chosen transitional entity (within the meaning of Division 701 of the Income Tax (Transitional Provisions) Act 1997 ).
Note: Item 104C prevents the application of this item in relation to certain assets and liabilities.
(2) For the purposes of subitem 104(13) and Division 230 of the Income Tax Assessment Act 1997 :
(a) in the case of an asset--assume that subsection 701 - 55(5A) of that Act applies in relation to the asset at the joining time; and
(b) in the case of a liability--assume that section 715 - 375 of that Act applies as if the liability is, or is part of, a Division 230 financial arrangement at the joining time.
(3) Subitems 104(14) and (15) do not apply in relation to the asset or liability.
(4) In the case of an asset, subitems ( 5), (6) and (7) apply if, on the assumption that subsection 701 - 55(5A) of the Income Tax Assessment Act 1997 applies in relation to the asset at the joining time, paragraph 701 - 55(5A)(b) of that Act would apply in relation to the asset.
(5) Work out if the Division 230 starting value for the asset at the joining time exceeds or falls short of its tax cost setting amount.
(6) If there is an excess, an amount equal to 25% of that excess is included in the head company's assessable income for:
(a) the head company's first applicable income year; and
(b) each of the 3 subsequent income years.
(7) If there is a shortfall, the head company is entitled to a deduction equal to 25% of that shortfall for:
(a) the head company's first applicable income year; and
(b) each of the 3 subsequent income years.
(8) In the case of a liability, subitem ( 9) applies if Subdivision 705 - B of the Income Tax Assessment Act 1997 (group formation) has effect in relation to the joining entity becoming a subsidiary member of the group.
(9) Treat the amount of the payment mentioned in subsection 715 - 375(2) of that Act as being the amount of consideration that the joining entity would need to provide, if it were to cease holding the liability just before the joining time, without an amount being assessable income of, or deductible to, the joining entity.
104C Exception to item 104B
(1) Subitem ( 2) applies if:
(a) assuming that item 51 of Schedule 3 to the Tax Laws Amendment (2012 Measures No. 2) Act 2012 commenced at the same time as this item, that item would apply in relation to a ruling or advice; and
(b) to the extent that the ruling or advice has effect in relation to the application of subsection 701 - 55(5C) or (6) of the original 2010 law (within the meaning of that Schedule) in respect of the joining entity mentioned in item 50 of that Schedule, that ruling or advice is in relation to an asset of an entity for an income year; and
(c) the asset is, or is part of, a financial arrangement at the start of the income year; and
(d) the requirements in subitem 104B(1) are satisfied in relation to the asset; and
(e) the entity is the head company mentioned in subitem 104B(1); and
(f) the income year is the head company's first applicable income year mentioned in subitem 104B(1).
(2) Item 104B does not apply in relation to the asset.
(3) Subitem ( 4) applies if:
(a) subitem ( 2) applies; and
(b) a liability is, or is part of, a financial arrangement at the start of the income year mentioned in subitem ( 1); and
(c) the financial arrangement is of the same kind as the financial arrangement mentioned in paragraph ( 1)(c); and
(d) the requirements in subitem 104B(1) are satisfied in relation to the liability; and
(e) the head company mentioned in subitem 104B(1) is the same entity as the head company mentioned in paragraph ( 1)(e) of this item.
(4) Item 104B does not apply in relation to the liability.
6 Application
Items 1, 2 and 3 of this Schedule apply in the same way as Part 2 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 applies.
Note: The application of the amendments made by Part 2 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 is set out in Part 3 of that Schedule.