Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) This section applies if a * general insurance company becomes or ceases to be a * subsidiary member of a * consolidated group.
(2) If the * general insurance company becomes a * subsidiary member of the group:
(a) in working out the step 2 amount for the purposes of the table in section 705 - 60, reduce that amount by the sum of the amount of each thing mentioned in subsection (4); and
(b) in working out the * tax cost setting amount of a thing mentioned in subsection (4) for the purposes of section 705 - 35, treat the * market value of the thing as zero.
(3) If the * general insurance company ceases to be a * subsidiary member of the group:
(a) in working out the step 4 amount for the purposes of the table in section 711 - 20, reduce that amount by the sum of the amount of each thing mentioned in subsection (4); and
(b) for the purposes of section 711 - 25, treat the * terminating value of a thing mentioned in subsection (4) as zero.
(4) The things are the * general insurance company's:
(a) deferred acquisition costs in relation to the company's unearned premium reserve; and
(b) deferred reinsurance expenses in relation to the company's unearned premium reserve; and
(c) recoveries receivable in relation to the company's * outstanding claims.
(a) are resident in Australia; and
(b) are wholly - owned subsidiaries of the head company (either directly or through other companies, trusts and partnerships).
Losses transferred to the head company of a consolidated group under Subdivision 707 - A can be utilised for an income year only against a fraction of the income or gains remaining after the company has utilised other losses and deductions.
Note: This Subdivision does not apply if the joining entity is a designated infrastructure project entity just before the transfer and the head company is a designated infrastructure project entity just after the transfer: see section 415 - 45.
(a) has for a period been owed to a member of a consolidated group; and
(b) has for another period been owed to an entity that was not a member of that group;
Method statement
Step 1. Add up:
(a) each amount settled on the trust before or at the joining time; and
(b) the * market value of each item of property settled on the trust before or at the joining time, worked out as at when the item was settled;
except to the extent that that amount or market value forms part of the * cost base of a * membership interest in the trust that was taken into account in working out the step 1 amount under section 705 - 65.
Step 2. Work out how much of the step 1 amount would have been paid in respect of the discretionary interests if, at the joining time:
(a) the entire trust capital and trust income had been realised and distributed; and
(b) the trust had ended.
Note: This may involve determining how a power of appointment would have been exercised. Section 713 - 50 lists matters to have regard to in determining this.
Step 3. Reduce the step 2 amount by so much of it as:
(a) would have been included in the assessable income of any * member of the trust who owned any of the discretionary interests at the joining time; or
(b) would have been taken into account in working out a * capital gain or * capital loss made by such a member.
Step 4. Work out how much of the step 1 amount consists of one or more of these:
(a) an amount settled on the trust directly by the * head company of the * consolidated group (whether or not the group was in existence when the amount or item was settled on the trust);
(b) an amount settled on the trust directly by any other entity not excluded by subsection (3) (which covers entities that are not independent and unconnected donors to the trust);
(c) the * market value of an item of property settled on the trust directly by the head company;
(d) the market value of an item of property settled on the trust directly by any other entity not excluded by subsection (3).
Step 5. The step 1 amount worked out under section 705 - 65 is increased by the lesser of:
(a) the step 3 amount worked out under this method statement; and
(b) the step 4 amount worked out under this method statement.
(a) an entity that is a partner in a partnership becomes a subsidiary member of a consolidated group;
(b) a partnership becomes, or ceases to be, a subsidiary member of a consolidated group.
(a) a life insurance company that becomes, or ceases to be, a member of a consolidated group; and
(b) the head company of a consolidated group where a life insurance company is a subsidiary member of the group.
715 - A Treatment of unrealised losses existing when ownership or control of a company changes before or during consolidation
715 - B How Subdivision 165 - CD applies to consolidated groups and leaving entities
715 - C Common rules for the purposes of Subdivisions 715 - A and 715 - B
715 - D Treatment of company's deferred losses under Subdivision 170 - D on joining a consolidated group
715 - E Interactions with Division 775 (Foreign currency gains and losses)
715 - F Interactions with Division 230 (financial arrangements)
715 - G How value shifting rules apply to a consolidated group
715 - H Cancelling loss on realisation event for direct or indirect interest in a member of a consolidated group
715 - J Entry history rule and choices
715 - K Exit history rule and choices
715 - U Effect on conduit foreign income
715 - V Entity ceasing to be exempt from income tax on becoming subsidiary member of consolidated group
715 - W Effect on arrangements where CGT roll - overs are obtained
715 - 15 Object of this Subdivision
Effect on Subdivision 165 - CC of a company becoming a member of a consolidated group
715 - 25 Subdivision 165 - CC stops applying to earlier changeover time
715 - 30 Meaning of 165 - CC tagged asset
715 - 35 Meaning of final RUNL
165 - CC tagged assets that affect tax cost setting amounts
715 - 50 Step 1 amount is reduced if membership interest in subsidiary member is 165 - CC tagged asset and business continuity test is failed
715 - 55 Step 2 amount is affected if liability of subsidiary member is 165 - CC tagged asset of another group member and business continuity test is failed
165 - CC tagged assets that form loss denial pools of head company when consolidated group is formed
715 - 60 Assets that the head company already owns
715 - 70 Assets of subsidiary member that become those of head company
How Subdivision 165 - CC applies to consolidated groups
715 - 75 Extension of single entity rule and entry history rule
Effect on Subdivision 165 - CC of entity leaving consolidated group
715 - 80 Application of sections 715 - 85 to 715 - 110
715 - 85 First changeover time for leaving company at or after leaving time
715 - 90 How business continuity test applies if leaving time is changeover time for leaving company
715 - 95 If ownership and control of leaving entity have not changed since head company's last changeover time
715 - 100 First choice: adjustable values of leaving assets reduced to nil
715 - 105 Second choice: head company's final RUNL applied in reducing adjustable values of leaving assets that are loss assets
715 - 110 Third choice: loss denial pool of leaving entity created
Effect of assets in loss denial pool of head company becoming assets of leaving entity
715 - 125 First choice: adjustable values of leaving assets reduced to nil
715 - 130 Second choice: pool's loss denial balance applied in reducing adjustable values of leaving assets that are loss assets
715 - 135 Third choice: loss denial pool of leaving entity created
Effect of first and second choices on various kinds of assets
715 - 145 Effect of choice on adjustable value of leaving asset
General provisions about loss denial pools
715 - 155 When asset leaves pool
715 - 160 How loss denial balance is applied to losses realised on assets in pool
715 - 165 When pool ceases to exist
Choices under this Subdivision
715 - 175 When choice must be made
715 - 180 Head company to notify leaving entity of choice
715 - 185 Leaving entity may choose to cancel loss denial pool by
reducing adjustable values of assets in the pool