1

Start with the step 1 amount worked out under section   705 - 65, which is about the cost of * membership interests in the joining entity held by * members of the joined group

To ensure that the allocable cost amount includes the cost of * acquiring the membership interests

2

Add to the result of step 1 the step 2 amount worked out under section   705 - 70, which is about the value of the joining entity's liabilities

To ensure that the joining entity's liabilities at the joining time, which are part of the joined group's cost of acquiring the joining entity, are reflected in the allocable cost amount

3

Add to the result of step 2 the step 3 amount worked out under:

(a) section   705 - 90, which is about undistributed, taxed profits accruing to the joined group before the joining time; or

(b) if the joining entity is a trust (and not a * corporate tax entity)--section   713 - 25, which is about undistributed, realised profits accruing to the joined group before the joining time that could be distributed tax free

To increase the allocable cost amount:

(a) to reflect the undistributed, taxed profits and so prevent double taxation; or

(b) if the joining entity is a trust--to reflect the undistributed, realised profits that could be distributed tax free

3A

For each step 3A amount (if any) under section   705 - 93 (which is about pre - joining time roll - overs):

(a) if the step 3A amount is a * deferred roll - over loss--add to the result of step 3 (as affected by any previous application of this step) the step 3A amount; or

(b) if the step 3A amount is a * deferred roll - over gain--subtract from the result of step 3 (as affected by any previous application of this step) the step 3A amount

To adjust for certain roll - overs before the joining time affecting deferred gains and losses

4

Subtract from the result of step 3A the step 4 amount worked out under section   705 - 95, which is about pre - joining time distributions out of certain profits

To prevent the allocable cost amount reflecting return of part of the amount paid to * acquire the * membership interests in the joining entity

5

Subtract from the result of step 4 the step 5 amount worked out under section   705 - 100, which is about certain losses accruing to the joined group before the joining time

To prevent:

(a) a double benefit arising from the losses; and

(b) losses that cannot be transferred to the * head company, or are cancelled by the head company, under Subdivision   707 - A being reinstated in an unrealised form or reducing unrealised gains.

5A

Subtract from the result of step 5 the step 5A amount worked out under section   705 - 102, which is about certain * FRT disallowed amounts accruing to the joined group before the joining time

To prevent a double benefit arising from the FRT disallowed amounts

6

Subtract from the result of step 5A the step 6 amount worked out under section   705 - 110, which is about losses that the joining entity transferred to the * head company under Subdivision   707 - A

To stop the joined group getting benefits both through higher * tax cost setting amounts for the joining entity's assets and through losses transferred to the head company

6A

Subtract from the result of step 6 the step 6A amount worked out under section   705 - 112, which is about * FRT disallowed amounts that the joining entity transferred to the * head company under section 820 - 590

To stop the joined group getting benefits both through higher * tax cost setting amounts for the joining entity's assets and through FRT disallowed amounts transferred to the head company

7

Subtract from the result of step 6A the step 7 amount worked out under section   705 - 115, which is about certain deductions to which the * head company is entitled

To stop the joined group getting benefits both through the * tax cost of the joining entity's assets being set and through certain tax deductions of the joining entity being inherited by the head company

8

If the remaining amount is positive, it is the joined group's allocable cost amount. Otherwise the joined group's allocable cost amount is nil.