Commonwealth Consolidated Acts

INCOME TAX ASSESSMENT ACT 1997 - SECT 716.440

  (1)   Subsection   (3) applies if:

  (a)   an entity (the joining entity ) becomes a * subsidiary member of a * consolidated group at a time (the joining time ); and

  (b)   another entity (the disposing entity ) ceased to hold * membership interests in the joining entity during the period that:

  (i)   started 12 months before the joining time; and

  (ii)   ended immediately after the joining time; and

  (c)   a * CGT event happened because the disposing entity ceased to hold the membership interests; and

  (d)   either:

  (i)   a * capital gain or * capital loss of the disposing entity from the CGT event was disregarded because of the operation of Division   855; or

  (ii)   if there had been a capital gain or capital loss of the disposing entity from the CGT event, the capital gain or capital loss would have been disregarded because of the operation of Division   855; and

  (e)   section   701 - 10 (cost to head company of assets of joining entity) applies to the joining entity's assets in respect of the joining entity becoming a subsidiary member of the group (disregarding subsection   (3) of this section); and

  (f)   it is reasonable to conclude that, throughout the period mentioned in paragraph   (b), the sum of the * total participation interests held by an entity (the control entity ) and its * associates in the joining entity was 50% or more; and

  (g)   in a case where the control entity is not the disposing entity--it is reasonable to conclude that the sum of the total participation interests held by the control entity and its associates in the disposing entity was 50% or more at the time the CGT event happened.

  (2)   For the purposes of paragraphs   (1)(f) and (g), in working out the sum of the * total participation interests held by the control entity and its * associates in another entity, take into account:

  (a)   a particular * direct participation interest; or

  (b)   a particular * indirect participation interest;

held in the other entity only once if it would otherwise be counted more than once because the entity holding it is an associate of the control entity.

  (3)   The following provisions do not apply to the joining entity's assets in respect of the joining entity becoming a * subsidiary member of the group:

  (a)   section   701 - 10 (cost to head company of assets of joining entity);

  (b)   subsection   701 - 35(4) (setting value of trading stock at tax - neutral amount);

  (c)   subsection   701 - 35(5) (setting value of registered emissions unit at tax - neutral amount).

Note:   This subsection does not affect the application of subsection   701 - 1(1) (the single entity rule).

  (4)   Subsection   (5) applies if:

  (a)   an entity (the higher level entity ) holds * membership interests in the joining entity (whether directly or through one or more interposed entities) at a time during the period mentioned in paragraph   (1)(b); and

  (b)   the higher level entity becomes a * subsidiary member of the * consolidated group at the joining time; and

  (c)   the requirement in paragraph   (1)(b) is not satisfied (disregarding subsection   (5)); and

  (d)   the requirement in paragraph   (1)(b) would be satisfied if the reference in paragraph   (1)(b) to membership interests in the joining entity included a reference to membership interests in the higher level entity.

  (5)   Treat the reference in paragraph   (1)(b) to * membership interests in the joining entity as including a reference to membership interests in the higher level entity.

Table of sections

716 - 500   Head company bound by agreements binding on subsidiary members

716 - 505   History for entitlement to tax offset: joining entity

716 - 510   History for entitlement to tax offset: leaving entity