Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 700.10

Objects of this Part

    The objects of this Part are:

  (a)   to prevent double taxation of the same economic gain realised by a consolidated group; and

  (b)   to prevent a double tax benefit being obtained from an economic loss realised by a consolidated group; and

  (c)   to provide a systematic solution to the prevention of such double taxation and double tax benefits that will:

  (i)   reduce the cost of complying with this Act; and

  (ii)   improve business efficiency by removing complexities and promoting simplicity in the taxation of wholly - owned groups.

You can choose for transactions under a scheme to restructure a company's or unit trust's business to be tax neutral if, under the scheme:

  (a)   you cease to own shares in the company or units in the trust; and

  (b)   in exchange, you become the owner of new shares in another company.

This Part allows certain groups of entities to be treated as single entities for income tax purposes.

Following a choice to consolidate, subsidiary members are treated as part of the head company of the group rather than as separate income tax identities. The head company inherits their income tax history when they become subsidiary members of the group. On ceasing to be subsidiary members, they take with them an income tax history that recognises that they are different from when they became subsidiary members.

This is supported by rules that:

  (a)   set the cost for income tax purposes of assets that subsidiary members bring into the group; and

  (b)   determine the income tax history that is taken into account when entities become, or cease to be, subsidiary members of the group; and

  (c)   deal with the transfer of tax attributes such as losses and franking credits to the head company when entities become subsidiary members of the group.

Table of sections

Common rule

701 - 1   Single entity rule

Head company rules

701 - 5   Entry history rule

701 - 10   Cost to head company of assets of joining entity

701 - 15   Cost to head company of membership interests in entity that leaves group

701 - 20   Cost to head company of assets consisting of certain liabilities owed by entity that leaves group

701 - 25   Tax - neutral consequence for head company of ceasing to hold assets when entity leaves group

Entity rules

701 - 30   Where entity not subsidiary member for whole of income year

701 - 35   Tax - neutral consequence for entity of ceasing to hold assets when it joins group

701 - 40   Exit history rule

701 - 45   Cost of assets consisting of liabilities owed to entity by members of the group

701 - 50   Cost of certain membership interests of which entity becomes holder on leaving group

Supporting provisions

701 - 55   Setting the tax cost of an asset

701 - 56   Application of subsection   701 - 55(6)

701 - 58   Effect of setting the tax cost of an asset that the head company does not hold under the single entity rule

701 - 60   Tax cost setting amount

701 - 60A   Tax cost setting amount for asset emerging when entity leaves group

701 - 61   Assets in relation to Division   230 financial arrangement--head company's assessable income or deduction

701 - 63   Right to future income and WIP amount asset

701 - 65   Net income and losses for trusts and partnerships

701 - 67   Assets in this Part are CGT assets, etc.

Exceptions

701 - 70   Adjustments to taxable income where identities of parties to arrangement merge on joining group

701 - 75   Adjustments to taxable income where identities of parties to arrangement re - emerge on leaving group

701 - 80   Accelerated depreciation

701 - 85   Other exceptions etc. to the rules


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