Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) The * resale royalty collecting society must give an entity notice of any payment it makes to the entity under section 26 of the Resale Royalty Right for Visual Artists Act 2009 , if section 51-45 of this Act applies to the society.
(2) The society must give the notice at the time of the payment.
(3) The notice must be in the * approved form.
Note: Under section 288-75 in Schedule 1 to the Taxation Administration Act 1953 the society is liable to an administrative penalty for failing to give a notice required under this section.
Contents
Chapter 3--Specialist liability rules i
Part 3-90--Consolidated groups 1
Division 700--Guide and objects 1
Guide 1
700-1..... What this Part is about ........................................................................ 1
700-5..... Overview of this Part .......................................................................... 2
700-10... Objects of this Part .............................................................................. 3
701-1..... Single entity rule ................................................................................. 5
Head company rules 6
701-5..... Entry history rule ................................................................................ 6
701-10... Cost to head company of assets of joining entity ................................ 7
701-15... Cost to head company of membership interests in entity that leaves group 8
701-20... Cost to head company of assets consisting of certain liabilities owed by entity that leaves group 9
701-25... Tax-neutral consequence for head company of ceasing to hold assets when entity leaves group 10
701-30... Where entity not subsidiary member for whole of income year ........ 11
701-35... Tax-neutral consequence for entity of ceasing to hold assets when it joins group 14
701-40... Exit history rule ................................................................................. 15
701-45... Cost of assets consisting of liabilities owed to entity by members of the group 16
701-50... Cost of certain membership interests of which entity becomes holder on leaving group 17
701-55... Setting the tax cost of an asset ........................................................... 18
701-56... Setting the tax cost of an asset--subsection 701-55(6) ..................... 20
701-58... Effect of setting the tax cost of an asset that the head company does not hold under the single entity rule 21
701-60... Tax cost setting amount ..................................................................... 22
701-61... Assets in relation to Division 230 financial arrangement--head company's assessable income or deduction 23
701-65... Net income and losses for trusts and partnerships ............................ 23
701-70... Adjustments to taxable income where identities of parties to arrangement merge on joining group 24
701-75... Adjustments to taxable income where identities of parties to arrangement re-emerge on leaving group 28
701-80... Accelerated depreciation .................................................................... 30
701-85... Other exceptions etc. to the rules ....................................................... 31
701-90... Valuable right to future income treated as separate asset ................... 31
Division 703--Consolidated groups and their members 33
Guide to Division 703 33
703-1..... What this Division is about ............................................................... 33
703-5..... What is a consolidated group ? .......................................................... 34
703-10... What is a consolidatable group ? ....................................................... 35
703-15... Members of a consolidated group or consolidatable group ............... 35
703-20... Certain entities that cannot be members of a consolidated group or consolidatable group 37
703-25... Australian residence requirements for trusts ..................................... 39
703-30... When is one entity a wholly-owned subsidiary of another? ............... 39
703-33... Transfer time for sale of shares in company ...................................... 40
703-35... Treating entities as wholly-owned subsidiaries by disregarding employee shares 41
703-37... Disregarding certain preference shares following an ADI restructure 42
703-40... Treating entities held through non-fixed trusts as wholly-owned subsidiaries 44
703-45 ... Subsidiary members or nominees interposed between the head company and a subsidiary member of a consolidated group or a consolidatable group ........................................................ 44
Choice to consolidate a consolidatable group 44
703-50... Choice to consolidate a consolidatable group .................................... 44
Consolidated group created when MEC group ceases to exist 46
703-55... Creating consolidated groups from certain MEC groups .................. 46
Notice of events affecting consolidated group 46
703-58... Notice of choice to consolidate .......................................................... 46
703-60... Notice of events affecting consolidated group ................................... 47
Effects of choice to continue group after shelf company becomes new head company 49
703-65... Application ........................................................................................ 49
703-70... Consolidated group continues in existence with interposed company as head company and original company as a subsidiary member ............................................................................ 49
703-75... Interposed company treated as substituted for original company at all times before the completion time 50
703-80... Effects on the original company's tax position .................................. 51
Division 705--Tax cost setting amount for assets where entities become subsidiary members of consolidated groups 53
Guide to Division 705 53
705-1..... What this Division is about ............................................................... 53
Subdivision 705-A--Basic case: a single entity joining an existing consolidated group 53
Guide to Subdivision 705-A 53
705-5..... What this Subdivision is about .......................................................... 53
705-10... Application and object of this Subdivision ........................................ 55
705-15... Cases where this Subdivision does not have effect ........................... 56
Tax cost setting amount for assets that joining entity brings into joined group 57
705-20... Tax cost setting amount worked out under this Subdivision ............. 57
705-25... Tax cost setting amount for retained cost base assets ........................ 57
705-27... Reduction in tax cost setting amount that exceeds market value of certain retained cost base assets 59
705-30... What is the joining entity's terminating value for an asset? .............. 60
705-35... Tax cost setting amount for reset cost base assets ............................. 62
705-40... Tax cost setting amount for reset cost base assets held on revenue account 63
705-45... Reduction in tax cost setting amount for accelerated depreciation assets 64
705-47... Reduction in tax cost setting amount for some privatised assets ....... 65
705-55... Order of application of sections 705-40, 705- 45 and 705-47 ............ 67
705-56... Modification for tax cost setting in relation to finance leases ............ 68
705-57... Adjustment to tax cost setting amount where loss of pre-CGT status of membership interests in joining entity 69
705-58... Assets and liabilities not set off against each other ............................ 73
705-59... Exception: treatment of linked assets and liabilities ........................... 73
How to work out the allocable cost amount 77
705-60... What is the joined group's allocable cost amount for the joining entity? 77
705-62... No double counting of amounts in allocable cost amount ................. 79
705-65... Cost of membership interests in the joining entity--step 1 in working out allocable cost amount 80
705-70... Liabilities of the joining entity--step 2 in working out allocable cost amount 84
705-75... Liabilities of the joining entity--reductions for purposes of step 2 in working out allocable cost amount 85
705-80... Liabilities of the joining entity--reductions/increases for purposes of step 2 in working out allocable cost amount .......................................................................................................... 87
705-85... Liabilities of the joining entity--increases for purposes of step 2 in working out allocable cost amount 88
705-90 ... Undistributed, taxed profits accruing to joined group before joining time--step 3 in working out allocable cost amount .......................................................................................................... 90
705-93... If pre-joining time roll-over from foreign resident company or head company--step 3A in working out allocable cost amount .............................................................................................. 93
705-95... Pre-joining time distributions out of certain profits--step 4 in working out allocable cost amount 94
705-100. Losses accruing to joined group before joining time--step 5 in working out allocable cost amount 94
705-105. Continuity of holding membership interests--steps 3 to 5 in working out allocable cost amount 95
705-110. If joining entity transfers a loss to the head company--step 6 in working out allocable cost amount 95
705-115. If head company becomes entitled to certain deductions--step 7 in working out allocable cost amount 96
How to work out a pre-CGT factor for assets of joining entity 97
705-125. Pre-CGT proportion for joining entity .............................................. 97
Subdivision 705-B--Case of group formation 98
Guide to Subdivision 705-B 98
705-130. What this Subdivision is about .......................................................... 98
705-135. Application and object of this Subdivision ........................................ 99
Modified application of Subdivision 705-A 100
705-140. Subdivision 705-A has effect with modifications ........................... 100
705-145. Order in which tax cost setting amounts are to be worked out where subsidiary members have membership interests in other subsidiary members ............................................................... 100
705-147. Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by subsidiary members in other such members ..................................................... 102
705-155 . Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests ............................................................. 103
705-160 . Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain entities that become subsidiary members ........................................................... 106
705-163. Modified application of section 705-57 ........................................... 108
Subdivision 705-C--Case where a consolidated group is acquired by another 111
Guide to Subdivision 705-C 111
705-170. What this Subdivision is about ........................................................ 111
705-175. Application and object of this Subdivision ...................................... 112
Modified application of Division 701 in relation to acquired group etc. 113
705-180. Modifications of Division 701 ........................................................ 113
Modified application of Subdivision 705-A in relation to acquiring group 114
705-185. Subdivision 705-A has effect with modifications ........................... 114
Modifications of Subdivision 705-A for the purposes of this Subdivision 115
705-195. Modified application of subsection 705- 65(6) ................................ 115
705-200. Modified application of section 705- 85 ........................................... 115
Subdivision 705-D--Where multiple entities are linked by membership interests 117
Guide to Subdivision 705-D 117
705-210. What this Subdivision is about ........................................................ 117
705-215. Application and object of this Subdivision ...................................... 118
Modified application of Subdivision 705-A 118
705-220. Subdivision 705-A has effect with modifications ........................... 118
705-225. Order in which tax cost setting amounts are to be worked out where linked entities have membership interests in other linked entities .................................................................................. 119
705-227. Adjustment in working out step 3A of allocable cost amount to take account of membership interests held by linked entities in other linked entities ......................................................... 120
705-230 . Adjustments to restrict step 4 reduction of allocable cost amount to effective distributions to head company in respect of direct membership interests ............................................................. 122
705-235 . Adjustment to allocation of allocable cost amount to take account of owned profits or losses of certain linked entities ........................................................................................................ 123
705-240. Modified application of section 705-57 ........................................... 125
Subdivision 705-E--Adjustments for errors etc. 127
Guide to Subdivision 705-E 127
705-300. What this Subdivision is about ........................................................ 127
705-305. Object of this Subdivision ............................................................... 127
705-310. Operation of Part IVA of the Income Tax Assessment Act 1936 .... 128
705-315. Errors that attract special adjustment action ..................................... 128
705-320. Tax cost setting amounts taken to be correct ................................... 129
Division 707--Losses for head companies when entities become members etc. 131
Subdivision 707-A--Transfer of previously unutilised losses to head company 131
class =MsoToc4>Guide to Subdivision 707-A 131
707-100. What this Subdivision is about ........................................................ 131
707-105. Who can utilise the loss? ................................................................. 132
707-110. Objects of this Subdivision ............................................................. 133
707-115. What losses this Subdivision applies to .......................................... 133
Transfer of loss from joining entity to head company 134
707-120. Transfer of loss from joining entity to head company ..................... 134
707-125. Modified same business test for companies' post-1999 losses ....... 135
707-130. Modified pattern of distributions test .............................................. 137
707-135. Transferring loss transferred to joining entity because same business test was passed 138
Effect of transfer of loss 138
707-140. Effect of transfer of loss .................................................................. 138
Cancelling the transfer of the loss 139
707-145. Cancelling the transfer of the loss ................................................... 139
What happens if the loss is not transferred? 139
707-150. Loss cannot be utilised for income year ending after the joining time 139
Subdivision 707-B--Can a transferred loss be utilised? 140
Guide to Subdivision 707-B 140
707-200. What this Subdivision is about ........................................................ 140
707-205. Modified period for test for maintaining same ownership ............... 140
707-210. Utilisation of certain losses transferred from a company depends on company that made the losses earlier 141
Subdivision 707-C--Amount of transferred losses that can be utilised 143
Guide to Subdivision 707-C 143
707-300. What this Subdivision is about ........................................................ 143
707-305. Object of this Subdivision ............................................................... 144
How much of a transferred loss can be utilised? 145
707-310. How much of a transferred loss can be utilised? ............................. 145
707-315. What is a bundle of losses? ............................................................. 148
707-320. What is the available fraction for a bundle of losses? ..................... 149
707-325. Modified market value of an entity becoming a member of a consolidated group [ see Note 8] 151
707-330. Losses transferred from former head company ............................... 153
707-335. Limit on utilising transferred losses if circumstances change during income year 154
707-340. Utilising transferred losses while exempt income remains .............. 155
707-345. Other provisions are subject to this Subdivision ............................. 157
Subdivision 707-D--Special rules about losses 157
707-400. Head company's business before and after consolidation not compared 157
707-410. Exit history rule does not treat entity as having made a loss ............ 157
707-415. Application of losses with nil available fraction for certain purposes 158
Division 709--Other rules applying when entities become subsidiary members etc. 162
Subdivision 709-A--Franking accounts 162
Guide to Subdivision 709-A 162
709-50... What this Subdivision is about ........................................................ 162
709-55... Object of this Subdivision ............................................................... 163
Treatment of franking accounts at joining time 164
709-60... Nil balance franking account for joining entity ................................ 164
Treatment of subsidiary member's franking account 164
709-65... Subsidiary member's franking account does not operate ................ 164
Treatment of head company's franking account 165
709-70... Credits arising in head company's franking account ....................... 165
709-75... Debits arising in head company's franking account ........................ 165
Franking distributions by subsidiary member 166
709-80... Subsidiary member's distributions on employee shares and certain preference shares taken to be distributions by the head company ................................................................................. 166
709-85... Non-share distributions by subsidiary members taken to be distributions by head company 166
709-90... Subsidiary member's distributions to foreign resident taken to be distributions by head company 167
Payment of group liability by former subsidiary member 167
709-95... Payment of group liability by former subsidiary member ............... 167
709-100. Refund of income tax to former subsidiary member ....................... 168
Subdivision 709-B--Imputation issues 169
Guide to Subdivision 709-B 169
709-150. What this Subdivision is about ........................................................ 169
709-155. Testing consolidated groups ............................................................ 169
709-160. Subsidiary member is exempting entity ........................................... 170
709-165. Subsidiary member is former exempting entity ............................... 171
709-170. Head company and subsidiary are exempting entities ..................... 172
709-175. Head company is former exempting entity ...................................... 172
Subdivision 709-C--Treatment of excess franking deficit tax offsets when entity becomes a subsidiary member of a consolidated group 175
Guide to Subdivision 709-C 175
709-180. What this Subdivision is about ........................................................ 175
709-185. Joining entity's excess franking deficit tax offsets transferred to head company 175
709-190. Exit history rule not to treat leaving entity as having a franking deficit tax offset excess 176
Subdivision 709-D--Deducting bad debts 177
Guide to Subdivision 709-D 177
709-200. What this Subdivision is about ........................................................ 177
709-205. Application of this Subdivision ....................................................... 177
709-210. Object of this Subdivision ............................................................... 179
Limit on deduction of bad debt 179
709-215. Limit on deduction of bad debt ........................................................ 179
Extension of Subdivision to debt/equity swap loss 183
709-220. Limit on deduction of swap loss ..................................................... 183
Division 711--Tax cost setting amount for membership interests where entities cease to be subsidiary members of consolidated groups 185
Guide to Division 711 185
711-1..... What this Division is about ............................................................. 185
Application and object of this Division 186
711-5..... Application and object of this Division ........................................... 186
Tax cost setting amount for membership interests etc. 187
711-10... Tax cost setting amount worked out under this Division ................ 187
711-15... Tax cost setting amount where no multiple exit ............................... 187
711-20... What is the old group's allocable cost amount for the leaving entity? 188
711-25... Terminating values of the leaving entity's assets--step 1 in working out allocable cost amount 190
711-30... What is the head company's terminating value for an asset? .......... 191
711-35... If head company becomes entitled to certain deductions--step 2 in working out allocable cost amount 192
711-40... Liabilities owed to the leaving entity by members of the old group--step 3 in working out allocable cost amount 192
711-45... Liabilities etc. owed by the leaving entity--step 4 in working out allocable cost amount 193
711-55... Tax cost setting amount for membership interests where multiple exit 197
711-65... Membership interests treated as having been acquired before 20 September 1985 199
711-70... Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711- 65--application of Division 149 to head company ...... 201
711-75... Additional integrity rule if membership interests treated as having been acquired before 20 September 1985 under section 711- 65--application of CGT event K6 ............................... 202
Division 713--Rules for particular kinds of entities 204
Working out a joined group's allocable cost amount for a joining trust 204
713-20... Increasing the step 1 amount for settled capital that could be distributed tax free in respect of discretionary interests ........................................................................................................ 204
713-25... Undistributed, realised profits that accrue to joined group before joining time and could be distributed tax free--step 3 in working out allocable cost amount .................................................. 208
Determining destination of distribution by non-fixed trust 209
713-50... Factors to consider .......................................................................... 209
Subdivision 713-C--Some unit trusts treated like head companies of consolidated groups 209
Guide to Subdivision 713-C 209
713-120. What this Subdivision is about ........................................................ 209
Object of this Subdivision 210
713-125. Object of this Subdivision ............................................................... 210
Choice to form a consolidated group 211
713-130. Choosing to form a consolidated group .......................................... 211
713-135. Effects of choice .............................................................................. 211
713-140. Modifications of the applied law ..................................................... 213
Subdivision 713-E--Partnerships 215
Guide to Subdivision 713-E 215
713-200. What this Subdivision is about ........................................................ 215
713-205. Objects of this Subdivision ............................................................. 216
Partnership cost setting interests etc. 217
713-210. Partnership cost setting interests ..................................................... 217
713-215. Terminating value for partnership cost setting interest .................... 218
Setting tax cost of partnership cost setting interests 218
713-220. Set tax cost of partnership cost setting interests if partner joins consolidated group 218
713-225. Tax cost setting amount for partnership cost setting interest ........... 219
Special rules where partnership joins consolidated group 221
713-235. Partnership joins group--set tax cost of partnership assets ............ 221
713-240. Partnership joins group--tax cost setting amount for partnership asset 222
Special rules where partnership leaves consolidated group 223
713-250. Partnership leaves group--standard provisions modified ............... 223
713-255. Partnership leaves group--tax cost setting amount for partnership cost setting interests 224
713-260. Partnership leaves group--tax cost setting amount for assets consisting of being owed certain liabilities 225
713-265. Partnership leaves group--adjustments to leaving partner's allocable cost amount 226
Subdivision 713-L--Life insurance companies 227
Guide to Subdivision 713-L 227
713-500. What this Subdivision is about ........................................................ 227
General modifications for life insurance companies 228
713-505. Head company treated as a life insurance company ......................... 228
713-510. Certain subsidiaries of life insurance companies cannot be members of consolidated group 229
713-510ADisregard single entity rule in working out certain amounts
in respect of life insurance company
...............................................
230
Life insurance companies' liabilities on joining consolidated group 231
713-511. Treatment of certain liabilities for income year when life insurance company joins consolidated group 231
Tax cost setting rules for life insurance companies joining consolidated group 232
713-515. Certain assets taken to be retained cost base assets where life insurance company joins group 232
713-520. Valuing certain liabilities where life insurance company joins group 233
713-525. Obligation to value certain assets and liabilities at joining time ....... 234
Losses of life insurance companies joining consolidated group 234
713-530. Treatment of certain losses of life insurance company .................... 234
Losses of life insurance companies' subsidiaries joining consolidated group 235
713-535. Losses of entities whose membership interests are complying superannuation/FHSA assets of life insurance company ........................................................................................................ 235
713-540. Losses of entities whose membership interests are segregated exempt assets of life insurance company 236
Imputation rules for life insurance companies joining consolidated group 237
713-545. Treatment of franking surplus in franking account of life insurance subsidiary joining group 237
713-550. Treatment of head company's franking account after joining .......... 238
Liabilities for life insurance companies leaving consolidated group 239
713-565. Treatment of certain liabilities for income year when life insurance company leaves consolidated group 239
Losses for life insurance companies leaving consolidated group 240
713-570. Certain losses transferred to leaving company ................................ 240
Tax cost setting rules for life insurance companies leaving consolidated group 241
713-575. Terminating value of certain assets where life insurance company leaves group 241
713-580. Valuing certain liabilities where life insurance company leaves group 242
713-585. Obligation to value certain assets and liabilities at leaving time ....... 243
Subdivision 713-M--General insurance companies 243
Guide to Subdivision 713-M 243
713-700. What this Subdivision is about ........................................................ 243
Tax cost setting rules for general insurance companies joining consolidated group 244
713-705. Certain assets taken to be retained cost base assets where general insurance company joins group 244
Liabilities and reserves of general insurance companies joining and leaving consolidated groups 244
713-710. Treatment of liabilities and reserves for income year when general insurance company joins or leaves group 244
713-715. If general insurance company joins consolidated group .................. 245
713-720. If general insurance company leaves consolidated group ................ 246
713-725. Treatment of certain assets and liabilities of general insurance companies 247
Division 715--Interactions between this Part and other areas of the income tax law 248
Subdivision 715-A--Treatment of unrealised losses existing when ownership or control of a company changes before or during consolidation 249
715-15... Object of this Subdivision ............................................................... 250
Effect on Subdivision 165-CC of a company becoming a member of a consolidated group 251
715-25... Subdivision 165-CC stops applying to earlier changeover time ...... 251
715-30... Meaning of 165-CC tagged asset ................................................... 252
715-35... Meaning of final RUNL .................................................................. 252
165-CC tagged assets that affect tax cost setting amounts 253
715-50... Step 1 amount is reduced if membership interest in subsidiary member is 165-CC tagged asset and same business test is failed ............................................................................................... 253
715-55... Step 2 amount is affected if liability of subsidiary member is 165-CC tagged asset of another group member and same business test is failed ....................................................................... 254
165-CC tagged assets that form loss denial pools of head company when consolidated group is formed 256
715-60... Assets that the head company already owns ................................... 256
715-70... Assets of subsidiary member that become those of head company . 257
How Subdivision 165-CC applies to consolidated groups 259
715-75... Extension of single entity rule and entry history rule ...................... 259
Effect on Subdivision 165-CC of entity leaving consolidated group 259
715-80... Application of sections 715- 85 to 715-110 ..................................... 259
715-85... First changeover time for leaving company at or after leaving time . 259
715-90... How same business test applies if leaving time is changeover time for leaving company 260
715-95... If ownership and control of leaving entity have not changed since head company's last changeover time 260
715-100. First choice: adjustable values of leaving assets reduced to nil ........ 261
715-105. Second choice: head company's final RUNL applied in reducing adjustable values of leaving assets that are loss assets ........................................................................................................ 261
715-110. Third choice: loss denial pool of leaving entity created ................... 262
Effect of assets in loss denial pool of head company becoming assets of leaving entity 263
715-120. What happens .................................................................................. 263
715-125. First choice: adjustable values of leaving assets reduced to nil ........ 264
715-130. Second choice: pool's loss denial balance applied in reducing adjustable values of leaving assets that are loss assets ........................................................................................................ 264
715-135. Third choice: loss denial pool of leaving entity created ................... 265
Effect of first and second choices on various kinds of assets 266
715-145. Effect of choice on adjustable value of leaving asset ....................... 266
General provisions about loss denial pools 267
715-155. When asset leaves pool ................................................................... 267
715-160. How loss denial balance is applied to losses realised on assets in pool 267
715-165. When pool ceases to exist ............................................................... 268
Choices under this Subdivision 268
715-175. When choice must be made ............................................................. 268
715-180. Head company to notify leaving entity of choice ............................. 269
715-185. Leaving entity may choose to cancel loss denial pool by reducing adjustable values of assets in the pool 269
Subdivision 715-B--How Subdivision 165-CD applies to consolidated groups and leaving entities 270
How Subdivision 165-CD applies to consolidated groups 270
715-215. Extension of single entity rule and entry history rule ...................... 270
715-225. Working out adjusted unrealised loss using individual asset method 271
715-230. No reductions or other consequences for interests subject to loss cancellation under Subdivision 715-H 272
How Subdivision 165-CD applies to leaving entity that is a company 272
715-240. Application of sections 715- 245 to 715-260 ................................... 272
715-245. If ownership or control of leaving entity has altered since head company's last alteration time or formation of group ........................................................................................................ 273
715-250. If head company has had an alteration time but ownership and control of leaving entity have not altered since 274
715-255. Consequences if leaving entity is a loss company at the leaving time 275
715-260. If neither of sections 715- 245 and 715-250 applies ........................ 276
715-265. Head company does not have relevant equity or debt interest in a loss company if widely held top company does not have such an interest ....................................................................... 277
How Subdivision 165-CD applies to leaving entity that is a trust 278
715-270. Subdivision 165-CD applies ........................................................... 278
Subdivision 715-C--Common rules for the purposes of Subdivisions 715-A and 715-B 280
715-290. Additional assumptions to be made when using reference time ...... 280
Subdivision 715-D--Treatment of company's deferred losses under Subdivision 170-D on joining a consolidated group 280
715-310. What is a 170-D deferred loss , and when it revives ........................ 281
Deferred loss on 165-CC tagged asset 281
715-355. Head company's own deferred losses at formation time ................. 281
715-360. Deferred losses brought in by subsidiary member .......................... 282
715-365. How loss denial balance is applied when 170-D deferred loss revives 283
Subdivision 715-E--Interactions with Division 775 (Foreign currency gains and losses) 284
715-370. Cost setting--reference time for determining currency exchange rate effect 284
Subdivision 715-F--Interactions with Division 230 (financial arrangements) 285
715-375. Cost setting--amount of liability that is Division 230 financial arrangement 285
715-380. Exit history rule not to affect certain matters related to Division 230 financial arrangements 286
715-385. Exit history rule and elective methods applying to Division 230 financial arrangements 287
Subdivision 715-G--How value shifting rules apply to a consolidated group 287
715-410. Extension of single entity rule and entry history rule ...................... 287
715-450. No reductions or other consequences for interests subject to loss cancellation under Subdivision 715-H 288
Subdivision 715-H--Cancelling loss on realisation event for direct or indirect interest in a member of a consolidated group 289
715-610. Cancellation of loss ......................................................................... 289
715-615. Exception for interests in entity leaving consolidated group ............ 290
715-620. Exception if loss attributable to certain matters ................................ 291
Subdivision 715-J--Entry history rule and choices 292
Head company's choice overriding entry history rule 292
715-660. Head company's choice overriding entry history rule ..................... 292
Choices head company can make ignoring entry history rule to override inconsistencies 295
715-665. Head company's choice to override inconsistency .......................... 295
Choices with ongoing effect 299
715-670. Ongoing effect of choices made by entities before joining group .... 299
715-675. Head company adopting choice with ongoing effect ....................... 300
Subdivision 715-K--Exit history rule and choices 300
Choices leaving entity can make ignoring exit history rule 301
715-700. Choices leaving entity can make ignoring exit history rule .............. 301
Choices leaving entity can make ignoring exit history rule to overcome inconsistencies 303
715-705. Choices leaving entity can make ignoring exit history rule to overcome inconsistencies 303
Subdivision 715-U--Effect on conduit foreign income 306
715-875. Extension of single entity rule and entry history rule ...................... 306
715-880. No CFI for leaving entity ................................................................ 306
Subdivision 715-V--Entity ceasing to be exempt from income tax on becoming subsidiary member of consolidated group 306
715-900. Transition time taken to be just before joining time ......................... 306
Subdivision 715-W--Effect on arrangements where CGT roll-overs are obtained 307
715-910. Effect on restructures--original entity becomes a subsidiary member 307
715-915. Effect on restructures--original entity is a head company ............... 308
715-920. Effect on restructures--original entity is a head company that becomes a subsidiary member of another group 308
715-925. Effect on restructures--original entity ceases being a subsidiary member 310
Division 716--Miscellaneous special rules 311
Subdivision 716-A--Assessable income and deductions spread over several membership or non-membership periods 311
Guide to Subdivision 716-A 311
716-1..... What this Division is about ............................................................. 311
716-15... Assessable income spread over 2 or more income years ................. 312
716-25... Deductions spread over 2 or more income years ............................. 314
716-70... Capital expenditure that is fully deductible in one income year ....... 316
Assessable income and deductions arising from share of net income of a partnership or trust, or from share of partnership loss 318
716-75... Application ...................................................................................... 318
716-80... Head company's assessable income and deductions ....................... 319
716-85... Entity's assessable income and deductions for a non-membership period 320
716-90... Entity's share of assessable income or deductions of partnership or trust 321
716-95... Special rule if not all partnership or trust's assessable income or deductions taken into account in working out amount ........................................................................................................ 322
716-100. Spreading period ............................................................................. 322
Subdivision 716-E--Tax cost setting for exploration and prospecting assets 323
716-300. Prime cost method of working out decline in value ......................... 323
Subdivision 716-G--Low-value and software development pools 324
Assets in joining entity's low-value pool 324
716-330. Head company's deductions for decline in value of assets in joining entity's low-value pool 324
Entity leaving group with asset allocated to head company's low-value pool 327
716-335. Entity leaving group with asset allocated to head company's low-value pool 327
Depreciating assets arising from expenditure in joining entity's software development pool 329
716-340. Depreciating assets arising from expenditure in joining entity's software development pool 329
Software development pools if entity leaves consolidated group 332
716-345. Head company taken not to have incurred expenditure ................... 332
Subdivision 716-S--Miscellenous consequences of tax cost setting 332
716-400. Tax cost setting and bad debts ......................................................... 332
716-405. Tax cost setting and rights to future income--deduction ................. 334
716-410. Rights to amounts that are expected to be included in assessable income after joining time 336
Subdivision 716-V--Research and Development 336
716-500. Head company bound by agreements binding on subsidiary members 336
716-505. History for entitlement to tax offset: joining entity .......................... 337
716-510. History for entitlement to tax offset: leaving entity .......................... 337
716-800. Allocating amounts to periods if head company and subsidiary member have different income years 338
716-850. Grossing up threshold amounts for periods of less than 365 days .. 339
716-855. Working out the cost base or reduced cost base of a pre-CGT asset after certain roll-overs 339
716-860. CGT event straddling joining or leaving time .................................. 340
Division 717--International tax rules 342
Subdivision 717-A--Foreign income tax offsets 342
717-1..... What this Subdivision is about ........................................................ 342
717-5..... Object of this Subdivision ............................................................... 342
Foreign income tax on amounts in head company's assessable income 343
717-10... Head company taken to be liable for subsidiary member's foreign income tax 343
Subdivision 717-D--Transfer of certain surpluses under CFC provisions and former FIF and FLP provisions: entry rules 343
Guide to Subdivision 717-D 343
717-200. What this Subdivision is about ........................................................ 343
717-205. Object of this Subdivision ............................................................... 344
717-210. Attribution surpluses ....................................................................... 344
717-220. FIF surpluses .................................................................................. 345
717-227. Deferred attribution credits .............................................................. 346
Subdivision 717-E--Transfer of certain surpluses under CFC provisions and former FIF and FLP provisions: exit rules 347
Guide to Subdivision 717-E 347
717-235. What this Subdivision is about ........................................................ 347
717-240. Object of this Subdivision ............................................................... 347
717-245. Attribution surpluses ....................................................................... 348
717-255. FIF surpluses .................................................................................. 349
717-262. Deferred attribution credits .............................................................. 350
Subdivision 717-O--Offshore banking units 351
Guide to Subdivision 717-O 351
717-700. What this Subdivision is about ........................................................ 351
717-705. Object of this Subdivision ............................................................... 352
717-710. Head company treated as OBU ....................................................... 352
Subdivision 719-A--Modified application of Part 3-90 to MEC groups 353
719-2..... Modified application of Part 3-90 to MEC groups .......................... 353
Subdivision 719-B--MEC groups and their members 353
719-4..... What this Subdivision is about ........................................................ 353
719-5..... What is a MEC group ? .................................................................... 355
719-10... What is a potential MEC group? ..................................................... 358
719-15... What is an eligible tier-1 company ? ................................................ 361
719-20... What is a top company and a tier-1 company ? ................................ 362
719-25... Head company, subsidiary members and members of a MEC group 364
719-30... Treating entities as wholly-owned subsidiaries by disregarding employee shares 364
719-35... Treating entities held through non-fixed trusts as wholly-owned subsidiaries 365
719-40... Special conversion event--potential MEC group ............................ 365
719-45... Application of sections 703-20 and 703- 25 .................................... 366
Choice to consolidate a potential MEC group 367
719-50... Eligible tier-1 companies may choose to consolidate a potential MEC group 367
719-55... When choice starts to have effect .................................................... 369
719-60... Appointment of provisional head company ..................................... 369
719-65... Qualifications for the provisional head company of a MEC group . 370
719-70... Income year of new provisional head company to be the same as that of former provisional head company 371
Head company 372
719-75... Head company ................................................................................ 372
Notice of events affecting group 373
719-76... Notice of choice to consolidate ........................................................ 373
719-77... Notice in relation to new eligible tier-1 members etc. ...................... 374
719-78... Notice of special conversion event .................................................. 375
719-79... Notice of appointment of provisional head company after formation of group 376
719-80... Notice of events affecting MEC group ............................................ 377
Effects of change of head company 378
719-85... Application ...................................................................................... 378
719-90... New head company treated as substituted for old head company at all times before the transition time 378
719-95... No consequences of old head company becoming, and new head company ceasing to be, subsidiary member of the group ............................................................................................... 379
Subdivision 719-BA--Group conversions involving MEC groups 380
719-120. Application ...................................................................................... 380
719-125. Head company of new group retains history of head company of old group 381
719-130. Provisions of this Part not to apply to conversion ........................... 382
719-135. Provisions of this Part applying to conversion despite section 719-130 .. 383
719-140. Other provisions of this Part not applying to conversion ................ 383
Subdivision 719-C--MEC group cost setting rules: joining cases 384
Guide to Subdivision 719-C 384
719-150. What this Subdivision is about ........................................................ 384
719-155 . Object of this Subdivision ............................................................... 384
Modified application of tax cost setting rules for joining 385
719-160. Tax cost setting rules for joining have effect with modifications ..... 385
719-165 . Trading stock value not set for assets of eligible tier-1 companies .. 386
719-170. Modified effect of subsections 705- 175(1) and 705-185(1) ........... 386
Guide to Subdivision 719-F 387
719-250. What this Subdivision is about ........................................................ 387
Maintaining the same ownership to be able to utilise loss 388
719-255. Special rules .................................................................................... 388
719-260. Special test for utilising a loss because a company maintains the same owners 389
719-265. What is the test company? ............................................................... 390
719-270. Assumptions about the test company having made the loss for an income year 394
719-275. Assumptions about nothing happening to affect direct and indirect ownership of the test company 396
719-280. Assumptions about the test company failing to meet the conditions in section 165- 12 398
Same business test and change of head company 399
719-285. Same business test and change of head company ............................ 399
Bundles of losses and their available fractions 400
719-300. Application ...................................................................................... 400
719-305. Subdivision 707-C affects utilisation of losses made by ongoing head company while it was head company 401
719-310. Adjustment of available fractions for bundles of losses previously transferred to ongoing head company 402
719-315. Further adjustment of available fractions for all bundles ................. 402
719-320. Limit on utilising losses other than the prior group losses .............. 403
719-325. Cancellation of all losses in a bundle ............................................... 404
Subdivision 719-H--Imputation issues 405
719-425. Guide to Subdivision 719-H ........................................................... 405
719-430. Transfer of franking account balance on cessation event ................. 405
719-435. Distributions by subsidiary members of MEC group taken to be distributions by head company 406
Subdivision 719-I--Bad debts 406
Guide to Subdivision 719-I 406
719-450. What this Subdivision is about ........................................................ 406
Maintaining the same ownership to be able to deduct bad debt 407
719-455. Special test for deducting a bad debt because a company maintains the same owners 407
719-460. Assumptions about nothing happening to affect direct and indirect ownership of the test company 409
719-465. Assumptions about the test company failing to meet the conditions in section 165-123 409
Subdivision 719-J--MEC group cost setting rules: leaving cases 410
Guide to Subdivision 719-J 410
719-500. What this Subdivision is about ........................................................ 410
719-505. Application and object of this Subdivision ...................................... 411
719-510. Modified operation of paragraphs 711-15(1)(b) and (c) ................. 411
Subdivision 719-K--MEC group cost setting rules: pooling cases 412
Guide to Subdivision 719-K 412
719-550. What this Subdivision is about ........................................................ 412
719-555 . Application and object of this Subdivision ...................................... 412
719-560 . Pooled interests ............................................................................... 413
719-565 . Setting cost of reset interests ........................................................... 413
719-570 . Cost setting amount ......................................................................... 414
Subdivision 719-T--Interactions between this Part and other areas of the income tax law: special rules for MEC groups 415
How Subdivision 165-CC applies to MEC groups 416
719-700. Changeover times under section 165-115C or 165-115D ............... 416
719-705. Additional changeover times for head company of MEC group ..... 417
How Subdivision 165-CD applies to MEC groups 418
719-720. Alteration times under section 165-115L or 165-115M .................. 418
719-725. Additional alteration times for head company of MEC group ......... 419
719-730. Some alteration times only affect interests in top company ............. 420
719-735. Some alteration times affect only pooled interests ........................... 420
719-740. Head company does not have relevant equity or debt interest in a loss company if widely held top company does not have such an interest ....................................................................... 421
How indirect value shifting rules apply to a MEC group 421
719-755. Effect on MEC group cost setting rules if head company is losing entity or gaining entity for indirect value shift 421
Cancelling loss on realisation event for direct or indirect interest in a subsidiary member of a MEC group 422
719-775. Cancellation of loss ......................................................................... 422
719-780. Exception for pooled interests in eligible tier-1 companies .............. 423
719-785. Exception for interests in top company ........................................... 424
719-790. Exception for interests in entity leaving MEC group ....................... 424
719-795. Exception if loss attributable to certain matters ................................ 425
Division 721--Liability for payment of tax where head company fails to pay on time 426
Guide to Division 721 426
721-1..... What this Division is about ............................................................. 426
721-5..... Object of this Division .................................................................... 427
When this Division operates 427
721-10... When this Division operates ........................................................... 427
Joint and several liability of contributing member 430
721-15... Head company and contributing members jointly and severally liable to pay group liability 430
721-17... Notice of joint and several liability for general interest charge ........ 432
721-20... Limit on liability where group first comes into existence ................ 432
721-25... When a group liability is covered by a tax sharing agreement ......... 433
721-30... TSA contributing members liable for contribution amounts ............ 434
721-32... Notice of general interest charge liability under TSA ...................... 435
721-35... When a TSA contributing member has left the group clear of the group liability 436
721-40... TSA liability and group liability are linked ...................................... 436
Part 3-95--Value shifting 438
Division 723--Direct value shifting by creating right over non-depreciating asset 438
Subdivision 723-A--Reduction in loss from realising non-depreciating asset 438
723-1..... Object .............................................................................................. 438
723-10... Reduction in loss from realising non-depreciating asset over which right has been created 439
723-15... Reduction in loss from realising non-depreciating asset at the same time as right is created over it 441
723-20... Exceptions ....................................................................................... 442
723-25... Realisation event that is only a partial realisation ............................. 443
723-35... Multiple rights created to take advantage of the $50,000 threshold . 443
723-40... Application to CGT asset that is also trading stock or revenue asset 444
723-50... Effects if right created over underlying asset is also trading stock or a revenue asset 444
Subdivision 723-B--Reducing reduced cost base of interests in entity that acquires non-depreciating asset under roll-over 445
723-105. Reduced cost base of interest reduced when interest realised at a loss 445
723-110. Direct and indirect roll-over replacement for underlying asset ........ 446
Division 725--Direct value shifting affecting interests in companies and trusts 448
Guide to Division 725 448
725-1..... What this Division is about ............................................................. 448
Subdivision 725-A--Scope of the direct value shifting rules 449
725-45... Main object ..................................................................................... 449
725-50... When a direct value shift has consequences under this Division ..... 450
725-55... Controlling entity test ...................................................................... 450
725-65... Cause of the value shift ................................................................... 450
725-70... Consequences for down interest only if there is a material decrease in its market value 451
725-80... Who is an affected owner of a down interest? ................................. 452
725-85... Who is an affected owner of an up interest? .................................... 452
725-90... Direct value shift that will be reversed ............................................ 453
725-95... Direct value shift resulting from reversal ........................................ 453
Subdivision 725-B--What is a direct value shift 454
725-145. When there is a direct value shift ..................................................... 454
725-150. Issue of equity or loan interests at a discount .................................. 455
725-155. Meaning of down interests , decrease time , up interests and increase time 456
725-160. What is the nature of a direct value shift? ........................................ 457
725-165. If market value decrease or increase is only partly attributable to the scheme 457
Subdivision 725-C--Consequences of a direct value shift 457
725-205. Consequences depend on character of down interests and up interests 458
725-210. Consequences for down interests depend on pre-shift gains and losses .. 458
725-220. Neutral direct value shifts ................................................................ 459
725-225. Issue of bonus shares or units ......................................................... 459
725-230. Off-market buy-backs ..................................................................... 461
Subdivision 725-D--Consequences for down interest or up interest as CGT asset 461
725-240. CGT consequences; meaning of adjustable value ........................... 462
725-245. Table of taxing events generating a gain for interests as CGT assets 463
725-250. Table of consequences for adjustable values of interests as CGT assets 464
725-255. Multiple CGT consequences for the same down interest or up interest 467
Subdivision 725-E--Consequences for down interest or up interest as trading stock or a revenue asset 467
725-310. Consequences for down interest or up interest as trading stock ...... 467
725-315. Adjustable value of trading stock .................................................... 469
725-320. Consequences for down interest or up interest as a revenue asset ... 469
725-325. Adjustable value of revenue asset .................................................... 471
725-335. How to work out those consequences ............................................. 471
725-340. Multiple trading stock or revenue asset consequences for the same down interest or up interest 474
Subdivision 725-F--Value adjustments and taxed gains 475
725-365. Decreases in adjustable values of down interests (with pre-shift gains), and taxing events generating a gain 475
725-370. Uplifts in adjustable values of up interests under certain table items 477
725-375. Uplifts in adjustable values of up interests under other table items . 478
725-380. Decreases in adjustable value of down interests (with pre-shift losses) 480
Division 727--Indirect value shifting affecting interests in companies and trusts, and arising from non-arm's length dealings 482
Guide to Division 727 482
727-1..... What this Division is about ............................................................. 482
727-5..... What is an indirect value shift? ........................................................ 483
727-10... How does this Division deal with indirect value shifts? .................. 485
727-15... When does an indirect value shift have consequences under this Division? 485
727-25... Effect of this Division on realisations at a loss that occur before the nature or extent of an indirect value shift can be fully determined ....................................................................................... 486
Subdivision 727-A--Scope of the indirect value shifting rules 486
727-95... Main object ..................................................................................... 486
727-100. When an indirect value shift has consequences under this Division 487
727-105. Ultimate controller test .................................................................... 488
727-110. Common-ownership nexus test (if both losing and gaining entities are closely held) 488
727-125. No consequences if losing entity is a superannuation entity ............ 489
Subdivision 727-B--What is an indirect value shift 489
727-150. How to determine whether a scheme results in an indirect value shift 489
727-155. Providing economic benefits ........................................................... 491
727-160. When an economic benefit is provided in connection with a scheme 492
727-165. Preventing double-counting of economic benefits ........................... 492
Subdivision 727-C--Exclusions 493
Guide to Subdivision 727-C 493
727-200. What this Subdivision is about ........................................................ 493
727-215. Amount does not exceed $50,000 ................................................... 494
727-220. Disposal of asset at cost, or at undervalue if full value is not reflected in adjustable values of equity or loan interests in the losing entity ............................................................................... 494
Indirect value shifts involving services 495
727-230. Services provided by losing entity to gaining entity for at least their direct cost 495
727-235. Services provided by gaining entity to losing entity for no more than a commercially realistic price 496
727-240. What services certain provisions apply to ....................................... 497
727-245. How to work out certain amounts for the purposes of sections 727- 230 and 727- 235 498
727-250. Distribution by an entity to a member or beneficiary ....................... 499
727-260. Shift down a wholly-owned chain of entities .................................. 500
Subdivision 727-D--Working out the market value of economic benefits 501
727-300. What the rules in this Subdivision are for ....................................... 501
727-315. Transfer, for its adjustable value, of depreciating asset acquired for less than $1,500,000 501
Subdivision 727-E--Key concepts 502
727-350. Ultimate controller .......................................................................... 503
727-355. Control (for value shifting purposes) of a company ....................... 503
727-360. Control (for value shifting purposes) of a fixed trust ...................... 504
727-365. Control (for value shifting purposes) of a non-fixed trust .............. 505
727-370. Preventing double counting for percentage stake tests .................... 506
727-375. Tests in this Subdivision are exhaustive .......................................... 506
Common-ownership nexus and ultimate stake of a particular percentage 506
727-400. When 2 entities have a common-ownership nexus within a period . 506
727-405. Ultimate stake of a particular percentage in a company ................... 508
727-410. Ultimate stake of a particular percentage in a fixed trust ................. 509
727-415. Rules for tracing .............................................................................. 510
Subdivision 727-F--Consequences of an indirect value shift 511
Guide to Subdivision 727-F 511
727-450. What this Subdivision is about ........................................................ 511
727-455. Consequences of the indirect value shift ......................................... 512
727-460. Affected interests in the losing entity ............................................... 512
727-465. Affected interests in the gaining entity ............................................. 513
727-470. Exceptions ....................................................................................... 513
727-520. Equity or loan interest and related terms ......................................... 514
727-525. Indirect equity or loan interest ........................................................ 515
Affected owners 515
727-530. Who are the affected owners ........................................................... 515
Choices about method to be used 517
727-550. Choosing the adjustable value method ............................................ 517
727-555. Giving other affected owners information about the choice ............ 519
Subdivision 727-G--The realisation time method 520
727-600. What this Subdivision is about ........................................................ 520
727-610. Consequences of indirect value shift ............................................... 521
727-615. Reduction of loss on realisation event for affected interest in losing entity 522
727-620. Reduction of gain on realisation event for affected interest in gaining entity 523
727-625. Total gain reductions not to exceed total loss reductions ................. 523
727-630. How cap in section 727- 625 applies if affected interest is also trading stock or a revenue asset 524
727-635. Splitting an equity or loan interest ................................................... 526
727-640. Merging equity or loan interests ...................................................... 526
727-645. Effect of CGT roll-over ................................................................... 527
Further exclusion for certain 95% services indirect value shifts if realisation time method must be used 528
727-700. When 95% services indirect value shift is excluded ........................ 528
95% services indirect value shifts that are not excluded 529
727-705. Another provision of the income tax law affects amount related to services by at least $100,000 529
727-710. Ongoing or recent service arrangement reduces value of losing entity by at least $100,000 530
727-715. Service arrangements reduce value of losing entity that is a group service provider by at least $500,000 531
727-720. Abnormal service arrangement reduces value of losing entity that is not a group service provider by at least $500,000 ........................................................................................................ 533
727-725. Meaning of predominantly-services indirect value shift .................. 534
Subdivision 727-H--The adjustable value method 534
Guide to Subdivision 727-H 534
727-750. What this Subdivision is about ........................................................ 534
727-755. Consequences of indirect value shift ............................................... 535
Reductions of adjustable value 536
727-770. Reduction under the adjustable value method .................................. 536
727-775. Has there been a disaggregated attributable decrease? ..................... 537
727-780. Working out the reduction on a loss-focussed basis ....................... 538
Uplifts of adjustable value 539
727-800. Uplift under the attributable increase method .................................. 539
727-805. Has there been a disaggregated attributable increase? ...................... 541
727-810. Scaling-down formula ..................................................................... 542
Consequences of the method for various kinds of assets 543
727-830. CGT assets ...................................................................................... 543
727-835. Trading stock .................................................................................. 544
727-840. Revenue assets ................................................................................ 545
Subdivision 727-K--Reduction of loss on equity or loan interests realised before the IVS time 546
727-850. Consequences of scheme under this Subdivision ............................ 547
727-855. Presumed indirect value shift .......................................................... 548
727-860. Conditions about the prospective gaining entity .............................. 549
727-865. How other provisions of this Division apply to support this Subdivision 551
727-870. Effect of CGT roll-over ................................................................... 553
727-875. Application to CGT asset that is also trading stock or revenue asset 553
Subdivision 727-L--Indirect value shift resulting from a direct value shift 553
727-905. How this Subdivision affects the rest of this Division .................... 554
727-910. Treatment of value shifted under the direct value shift .................... 555
Table of sections
700-1 What this Part is about
700-5 Overview of this Part
Objects
700-10 Objects of this Part