Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 705.155

Object

  (1)   The object of this section is to ensure that, in working out the group's * allocable cost amount for entities that become * subsidiary members of the group at the formation time, the reduction under step 4 in the table in section   705 - 60 (about pre - formation time distributions out of certain profits) is made only for profits that have been effectively distributed to the * head company in respect of its direct * membership interests in the entities. This ensures consistency with the ordering rule in section   705 - 145.

When section applies

  (2)   This section applies to a distribution (the subject distribution ) to the extent that the following conditions are satisfied:

  (a)   the distribution is made by an entity (the subject entity ) that becomes a * subsidiary member of the group at the formation time;

  (b)   in working out the group's * allocable cost amount for the subject entity there would, apart from this section, be a reduction under step 4 in the table in section   705 - 60 for the distribution.

Step 4 reduction only if subject distribution is made to head company etc.

  (3)   There is no reduction as mentioned in paragraph   (2)(b) for the subject distribution unless:

  (a)   the subject distribution is made to the * head company of the group; or

  (b)   the reduction is in accordance with subsection   (5).

Step 4 reduction for effective distribution to head company

  (4)   If:

  (a)   at the formation time, the * head company of the group has a direct * membership interest in the subject entity; and

  (b)   the head company acquired the membership interest directly from another entity, or indirectly as a result of one or more acquisitions from other entities, where:

  (i)   former section   160ZZ0 of the Income Tax Assessment Act 1936 applied to each acquisition; or

  (ii)   there was a roll - over under Subdivision   126 - B for each acquisition;

    or a combination of these happened; and

  (c)   while it held the membership interest, the entity, or one of the entities, mentioned in paragraph   (b) (the recipient of the further distribution ) received a distribution (the further distribution ) of some of the subject distribution from the subject entity;

the consequences in subsections   (5) and (6) apply.

Reduction for further distribution that remains with recipient

  (5)   If:

  (a)   the following happen:

  (i)   by the formation time, any of the further distribution (the eligible reduction amount ) had not again been distributed by the recipient of the further distribution;

  (ii)   the recipient of the further distribution does not become a * subsidiary member of the group at the formation time; or

  (b)   the following happen:

  (i)   by the formation time, any of the further distribution (the eligible reduction amount ) had been distributed by the recipient of the further distribution to another entity directly, or indirectly though successive distributions by interposed entities;

  (ii)   that other entity does not become a subsidiary member of the group at the formation time; or

  (c)   both of the above paragraphs apply;

then, in working out the group's * allocable cost amount for the subject entity, the reduction under step 4 in the table in section   705 - 60 for the subject distribution only takes place to the extent that it equals the sum of all eligible reduction amounts.

Step 1 reduced cost base adjustment to reverse effect of reduction for further distribution

  (6)   Also, if former subsection   160ZK(5) of the Income Tax Assessment Act 1936 or subsection   110 - 55(7) of this Act applied to the further distribution, then for the purposes of step 1 in the table in section   705 - 60 in working out the group's * allocable cost amount for the subject entity:

  (a)   the reference in subsection   705 - 65(3) to a reduction resulting from the application of former subsection   160ZK(5) of the Income Tax Assessment Act 1936 ; and

  (b)   the reference in subsection   705 - 65(5) to a reduction that has taken place under subsection   110 - 55(7);

include a reference to the reduction in the * reduced cost base of the membership interest in the subject entity resulting from the application of former subsection   160ZK(5) of the Income Tax Assessment Act 1936 , or subsection   110 - 55(7) of this Act, to the further distribution.