the cost base or reduced cost base is worked out as if, in applying Subdivision 126-B or section 160ZZO in relation to the CGT event or the disposal, the provisions of that Subdivision or section applying to CGT assets ^* acquired on or after 20 September 1985 replaced those that applied to CGT assets acquired on or before that date.

Note: The effect is that the owner's cost base or reduced cost base will be the same as that of the originating company or transferor, as is the case with post-CGT assets.

Income Tax (Transitional Provisions) Act 1997

6 After section 701-5

701-7 Working out the cost base or reduced cost base of a pre-CGT asset after certain roll-overs
Section 716-855 applies for the purposes of this Division in the same way as that section applies for the purposes of Part 3-90 of the Income Tax Assessment Act 1997 .

Part 3—CGT event in respect of reduction in tax cost setting amounts for reset cost base assets

Income Tax Assessment Act 1997

7 Section 104-5 (at the end of the table)

8 At the end of Subdivision 104-L

104-535 Where reduction in tax cost setting amounts for reset cost base assets cannot be allocated: CGT event L8
(1) CGT event L8 happens if:
(a) an entity becomes a ^* subsidiary member of a ^* consolidated group or a ^* MEC group; and
(b) the ^* tax cost setting amount for a reset cost base asset of the entity is reduced under subsection 705-40(1) (including in its application in accordance with Subdivisions 705-B to 705-D); and
(c) some or all (the unallocated amount ) of the reduction cannot be allocated as mentioned in subsection 705-40(2).
(2) The time of the event is just after the entity becomes a ^* subsidiary member of the group.
(3) For the head company core purposes mentioned in subsection 701-1(2), the ^* head company makes a capital loss equal to the unallocated amount.
9 Section 110-10 (at the end of the table)

10 Subsection 705-40(2) (at the end of the note)

Part 4—Replacement of continuity of ownership test for retention of accelerated depreciation

Income Tax Assessment Act 1997

11 Subsection 701-80(3)

Section applies to certain depreciating assets

(3) This section applies if:
(a) a ^* depreciating asset to which Division 40 applies becomes that of the ^* head company because subsection 701-1(1) (the single entity rule) applies when the entity becomes a ^* subsidiary member of the group; and
(b) just before the entity became a subsidiary member, subsection 40-10(3) or 40-12(3) of the Income Tax (Transitional Provisions) Act 1997 applied for the purpose of the entity working out the asset's decline in value under Division 40; and

Note: The effect of those subsections was to preserve an entitlement to accelerated depreciation.

(c) the ^* tax cost setting amount that applies in relation to the asset for the purposes of section 701-10 when it becomes an asset of the head company is not more than the entity's ^* terminating value for the asset.
12 Paragraph 705-45(a)

(a) an asset of the joining entity is a ^* depreciating asset to which Division 40 applies; and
(aa) just before the entity became a subsidiary member, subsection 40-10(3) or 40-12(3) of the Income Tax (Transitional Provisions) Act 1997 applied for the purposes of the joining entity working out the asset's decline in value under Division 40; and

Note: The effect of those subsections was to preserve an entitlement to accelerated depreciation.

Part 5—Transitional adjustment to over-depreciation provisions where no unfranked or partly franked dividends

Income Tax (Transitional Provisions) Act 1997

13 Subsection 701-30(3)

Creation of, or increase in, tax deferral amount

(3) For the purposes of applying section 705-50 (reduction in tax cost setting amount for over-depreciated assets) of the Income Tax Assessment Act 1997 in relation to an asset of the transitional entity that becomes that of the head company under subsection 701-1(1) of that Act when the transitional group comes into existence:
(a) if, before the transitional group came into existence, the transitional entity paid any dividends to which paragraph 705-50(2)(b) of that Act applies—the tax deferral amount in relation to the dividends under subsection 705-50(3) of that Act is increased by the amount worked out under subsection (4) of this section; and
(b) if paragraph (a) does not apply—the transitional entity is taken to have paid dividends to which paragraph 705-50(2)(b) of that Act applies and there is taken to be a tax deferral amount in relation to the dividends under subsection 705-50(3) of that Act whose amount is worked out under subsection (4) of this section.
14 Subsection 701-30(4)

Note: The heading to subsection 701-30(4) is replaced by the heading " Amount for purposes of paragraphs (3)(a) and (b) ".

Part 6—Adjustments for errors etc.

Taxation Administration Act 1953

15 Subsection 8W(1C)

16 Subsection 8W(1C) (formula)

17 Subsection 8W(1C) (definition of capital gain )

18 Subsection 8W(1C)

tax on capital gain means the product of:

(a) the ^* capital gain that the ^* head company makes as a result of ^* CGT event L6 happening as mentioned in section 104- 525 of the Income Tax Assessment Act 1997 ; and
(b) the ^* corporate tax rate in respect of taxable income for the income year in which that CGT event happens.
19 Paragraph 284-80(2)(b) in Schedule 1

20 Subsection 284-80(2) in Schedule 1 (formula)

21 Subsection 284-80(2) in Schedule 1 (definition of capital gain )

22 Subsection 284-80(2) in Schedule 1

tax on capital gain means the product of:

(a) the ^* capital gain that the ^* head company makes as a result of ^* CGT event L6 happening as mentioned in section 104- 525 of the Income Tax Assessment Act 1997 ; and
(b) the ^* corporate tax rate in respect of taxable income for the income year in which that CGT event happens.
23 Subsection 284-150(3) in Schedule 1

24 Subsection 284-150(3) in Schedule 1 (formula)

25 Subsection 284-150(3) in Schedule 1 (definition of capital gain )

26 Subsection 284-150(3) in Schedule 1

tax on capital gain means the product of:

(a) the ^* capital gain that the ^* head company makes as a result of ^* CGT event L6 happening as mentioned in section 104- 525 of the Income Tax Assessment Act 1997 ; and
(b) the ^* corporate tax rate in respect of taxable income for the income year in which that CGT event happens.

Part 7—Extension of certain consolidation provisions to cover MEC groups

Income Tax Assessment Act 1997

27 Section 102-30 (table item 7A)

28 Section 104-5 (table row relating to event number L1)

29 Subdivision 104-L (heading)

Subdivision 104-L—Consolidated groups and MEC groups

30 Subsection 104-500(1)

31 Paragraphs 104-505(1)(a), 104-510(1)(a), 104-515(1)(a), 104-520(1)(a) and 104-525(1)(a)

32 Subsection 104-525(6) (definition of current asset setting amount )

33 Subsection 104-530(1)

34 Section 110-10 (table rows relating to event numbers L1 and L6)

Income Tax (Transitional Provisions) Act 1997

35 Paragraph 701B-1(1)(b)

36 Subsection 719-2(1)

37 Subsection 719-160(2)

Part 8—Excess franking deficit tax offsets

Income Tax Assessment Act 1997

38 At the end of section 701-30

Excess franking deficit tax offset for the income year

(10) For the purposes of applying section 205-70 in relation to an income year after the income year (the current income year ) to which this section applies, the entity has an excess mentioned in paragraph 205-70(1)(c) (about excess franking deficit tax offsets) for the current income year only if it has such an excess for the non-membership period (if any) ending at the end of the current income year. The amount of the excess for the current income year is the amount of the excess for the non-membership period.
39 At the end of Division 709

Subdivision 709-C—Treatment of excess franking deficit tax offsets when entity becomes a subsidiary member of a consolidated group
Guide to Subdivision 709-C
709-180 What this Subdivision is about

This Subdivision provides that any excess in the tax offset arising from a franking deficit tax liability of an entity that becomes a subsidiary member of a consolidated group is transferred to the head company of the group.

Table of sections

709-185 Joining entity's excess franking deficit tax offsets transferred to head company
709-190 Exit history rule not to treat leaving entity as having a franking deficit tax offset excess

709-185 Joining entity's excess franking deficit tax offsets transferred to head company
(1) This section operates if:
(a) an entity (the joining entity ) becomes a ^* subsidiary member of a ^* consolidated group at a time (the joining time ); and
(b) the joining entity is entitled to a ^* tax offset under section 205-70 for the income year that ends or, if subsection 701-30(3) applies, that is taken by subsection (3) of that section to end, at the joining time; and
(c) the offset exceeds (the excess being the joining entity's excess ) the amount that would have been the joining entity's income tax liability for that income year if it did not have that offset (but had all its other tax offsets).

Transfer of excess to head company

(2) For the purpose of applying subsection 205-70(1) to the ^* head company of the ^* consolidated group for the income year in which the joining time occurs:
(a) if the head company does not, after taking into account any application of this section to any other entity that became a ^* subsidiary member of the group before the joining time, have an excess mentioned in paragraph 205-70(1)(c) for the previous income year—the head company is taken to have an excess mentioned in that paragraph for the previous income year equal to the joining entity's excess; and
(b) if the head company does have such an excess—that excess is taken to be increased by the amount of the joining entity's excess.

Joining entity prevented from utilising excess in later income years

(3) For the purpose of applying subsection 205-70(1) to the joining entity for any income year after that in which the joining time occurs, the joining entity's excess is disregarded.
709-190 Exit history rule not to treat leaving entity as having a franking deficit tax offset excess
To avoid doubt, if:
(a) the ^* head company of a ^* consolidated group is entitled to a ^* tax offset under section 205-70 for an income year; and
(b) the offset exceeds the amount that would have been the head company's income tax liability for that income year if it did not have that offset (but had all its other tax offsets); and
(c) an entity ceases to be a ^* subsidiary member of the group in the income year;