Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 705.40

  (1)   The * tax cost setting amount for a reset cost base asset that is * trading stock, a * depreciating asset, a * registered emissions unit or a * revenue asset must not exceed the greater of:

  (a)   the asset's * market value; and

  (b)   the joining entity's * terminating value for the asset.

  (2)   If subsection   (1) reduces the asset's * tax cost setting amount, the amount of the reduction is allocated among the other reset cost base assets (including other * trading stock, * depreciating assets, * registered emissions units and * revenue assets), so as to increase their tax cost setting amounts, in accordance with the principles set out in subsection   (3).

Note:   If any of the amount of the reduction cannot be allocated, it is instead treated as a capital loss of the head company: see CGT event L8.

  (3)   These are the principles:

  (a)   the allocation is to be in proportion to the * market values of the assets;

  (b)   the amount allocated to an item of * trading stock, to a * depreciating asset, to a * registered emissions unit or to a * revenue asset must not cause its * tax cost setting amount to contravene subsection   (1);

  (c)   any of the amount that cannot be allocated is to be reallocated, to the maximum extent possible, among the remaining reset cost base assets by applying this subsection a further one or more times.