Commonwealth Consolidated Acts

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INCOME TAX ASSESSMENT ACT 1997 - SECT 705.27

Reduction in tax cost setting amount that exceeds market value of certain retained cost base assets

             (1)  If:

                     (a)  a * retained cost base asset of the joining entity is a right to receive a specified amount of such Australian currency, covered by paragraph 705-25(5)(b); and

                     (b)  the * market value of the asset is less than the * tax cost setting amount of the asset; and

                     (c)  the head company makes a * capital gain under * CGT event L3 (disregarding this subsection) as a result of the joining entity becoming a * subsidiary member of the group;

reduce the tax cost setting amount of the asset by the amount of the gain (but not below zero).

Note:          Reducing the tax cost setting amount of the asset will also reduce the amount of the capital gain (see paragraph 104-510(1)(b)). The amount of the capital gain might be reduced to nil.

             (2)  If:

                     (a)  the requirements in subsection 701-58(1) (intra-group assets) are satisfied in relation to the asset; and

                     (b)  the joining entity has been entitled to a deduction for an income year ending on or before the joining time because of the * market value of the asset being less than the specified amount mentioned in paragraph (1)(a); and

                     (c)  the accounting liability that corresponds to the asset has not been reduced under subsection 705-75(2);

reduce the amount of the reduction under subsection (1) by the amount of the deduction (but not below zero).

             (3)  If the * tax cost setting amount of 2 or more of the joining entity's assets could be reduced in accordance with subsections (1) and (2):

                     (a)  subsections (1) and (2) apply sequentially to each of those assets; and

                     (b)  the * head company may choose the sequence of assets to which subsections (1) and (2) apply; and

                     (c)  if the head company does not make such a choice--subsections (1) and (2) apply sequentially to each of those assets according to the time at which they were created, from earliest to latest.

Note:          Once the amount of the capital gain is reduced to nil as a result of the application of subsections (1) and (2), no further reductions of tax cost setting amount can be made under those subsections.

             (4)  A choice the * head company can make under paragraph (3)(b) must be made:

                     (a)  by the day the head company lodges its * income tax return for the income year in which the * CGT event happened; or

                     (b)  within a further time allowed by the Commissioner.

             (5)  The way the * head company prepares its * income tax return is sufficient evidence of the making of the choice.



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