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INCOME TAX ASSESSMENT ACT 1997 - SECT 705.125

Pre - CGT proportion for joining entity

Object

  (1)   Because intra - group * membership interests in the joining entity are disregarded under subsection   701 - 1(1) (the single entity rule), the object of this section is to provide a mechanism to ensure that the benefit of the pre - CGT status of those interests is not lost. That mechanism involves:

  (a)   working out the proportion (measured by market value) of the membership interests in the joining entity that have pre - CGT status; and

  (b)   if the joining entity later ceases being a member of the group, attaching pre - CGT status to that proportion of membership interests in it (see section   711 - 65), subject to integrity rules (see section   711 - 70).

How to work out pre - CGT proportion

  (2)   The pre - CGT proportion is the amount worked out by dividing:

  (a)   the sum of the * market value of each * membership interest in the joining entity that is:

  (i)   held by a * member of the group at the joining time; and

  (ii)   is a * pre - CGT asset;

by:

  (b)   the sum of the market value of each membership interest in the joining entity that is held by a member of the group at the joining time.

Modification if joining entity is a trust

  (4)   If the joining entity is a trust, a * membership interest in it is not taken into account under subsection   (2) unless the membership interest is either a unit or an interest in the trust.


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