Div 420of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division.

Division 420 of the Income Tax Assessment Act 1997 does not apply to a registered emissions unit held by you unless you became the holder of the unit after the commencement of that Division. Subdivision 615‑C of the Income Tax Assessment Act 1997 applies to you with the modifications set out in this Subdivision if you chose to obtain a roll‑over involving \*shares or units that: (b) were your trading stock, or revenue assets, at the time immediately before that disposal, redemption or cancellation. (1) Disregard subparagraph 615‑45(a)(ii), and paragraph 615‑45(b), of the Income Tax Assessment Act 1997 if the roll‑over relates to \*shares that were disposed of, redeemed or cancelled. (2) For each of the \*shares in the interposed company that you acquired in return for those of your shares or units in the original entity that were your \*trading stock at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  (2) For the purpose of calculating any profit or loss on a future disposal, cessation of ownership, or other realisation of a \*share in the interposed company that you acquired in return for those of your shares or units in the original entity that were \*revenue assets at the time mentioned in paragraph 615‑45(c), you are taken to have paid:  Subdivision 620‑A of the Income Tax Assessment Act 1997 applies in relation to the cessation of existence of bodies corporate occurring after 7.30 pm (by legal time in the Australian Capital Territory) on 11 May 2010. (1) Part 3‑90 of the Income Tax Assessment Act 1997, as inserted by the New Business Tax System (Consolidation) Act (No. 1) 2002 and amended by: (2) Section 713‑50 of the Income Tax Assessment Act 1997 (about factors to consider in determining destination of distribution by non‑fixed trust) applies for the purposes of this Part in the same way as it applies for the purposes of Part 3‑90 of that Act. ### Division 701—Modified application of provisions of Income Tax Assessment Act 1997 for certain consolidated groups formed in 2002‑3 and 2003‑4 financial years (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (i) at no time after 1 July 2002 and before the group came into existence was the entity a wholly‑owned subsidiary of the entity (the future head company) that became the head company of the group; or (ii) at some time during that period, the entity was a wholly‑owned subsidiary of the future head company and it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (a) the group is a transitional group if at least one entity that became a subsidiary member of the group on the day the group came into existence is a transitional entity; and (ii) it remained such from the earliest time after 1 July 2002 when it was a wholly‑owned subsidiary of the future head company until the group came into existence. (1) If a group is a transitional group, its head company may, subject to subsection (3), choose that the group’s transitional entity is a chosen transitional entity, or one or more of the group’s transitional entities are chosen transitional entities. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (3) If the choice is to be made after the end of the period mentioned in paragraph (2)(a) and before the end of the day mentioned in paragraph (2)(b), it cannot be made unless each entity in relation to which the conditions in subsection (5) are satisfied has agreed to it being made. (a) the entity (the leaving entity) ceased to be a subsidiary member of the group before the choice was made (in a subsection (3) case) or before the revocation took place (in a subsection (4) case); and (b) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; and (c) the asset had become that of the head company because that section applied when a chosen transitional entity (whether or not the same entity as the leaving entity) became a subsidiary member. 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. is a reference to that provision as it applies to the group, or to the allocable cost amount as it is worked out for the entity, in accordance with Subdivision 705‑B of that Act and with this Division. 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity Section 701‑10 (cost to head company of assets of joining entity) and subsection 701‑35(4) (setting value of trading stock at tax‑neutral amount) of the Income Tax Assessment Act 1997 do not apply to the assets of a chosen transitional entity. > Note: The fact that the head company inherits the entity’s history under section 701‑5 of that Act when the entity becomes a subsidiary member of the group means that the entity’s assets would be treated as having the same cost as they would for the entity at that time. #### 701‑20 Working out allocable cost amount on formation for subsidiary members other than chosen transitional entities (2) If this section applies, the group’s allocable cost amount for each of the entities, other than a chosen transitional entity, that become subsidiary members when the group comes into existence (each of which is a non‑chosen subsidiary) is worked out in a special way. (b) for each sub‑group (see subsection (6)) that exists in relation to the non‑chosen subsidiary—the sub‑group’s notional allocable cost amount (see subsection(5)) for the non‑chosen subsidiary. (4) The head company adjusted allocable amount for the non‑chosen subsidiary is the amount that would be the transitional group’s allocable cost amount for that entity if; (b) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of head company’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the head company holds directly or indirectly through interposed entities that become subsidiary members of the group at that time and are not included in any sub‑group in relation to the non‑chosen subsidiary. (5) For each sub‑group that exists in relation to the non‑chosen subsidiary, there is a sub‑group’s notional allocable cost amount. That amount is the amount that would be a consolidated group’s allocable cost amount for the non‑chosen subsidiary if: (a) the consolidated group came into existence at the same time as the transitional group and consisted only of the non‑chosen subsidiary and the entities comprising the sub‑group; and (c) the only membership interests that any entity held at or before that time in any other entity that became a member of the consolidated group were the sub‑group membership interests (see subsection (6)) in relation to the sub‑group, and any such entity held those membership interests during the period when it actually held them; and (d) only the following proportion of each of the step 2 to step 7 amounts in the table in section 705‑60 of the Income Tax Assessment Act 1997 was taken into account:  market value of all membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that are held by entities that become members of the group at that time. market value of chosen transitional entity’s direct and indirect membership interests in non‑chosen subsidiary means the market value, at the time the group comes into existence, of all membership interests in the non‑chosen subsidiary that the chosen transitional entity holds directly or indirectly through interposed entities that are included in the sub‑group. (6) If a chosen transitional entity holds membership interests in a non‑chosen subsidiary, either directly or indirectly through one or more other entities, each of which is a non‑chosen subsidiary: (a) the chosen transitional entity and each interposed non‑chosen subsidiary comprise a sub‑group in relation to the non‑chosen subsidiary (unless the non‑chosen subsidiary is included in a sub‑group in relation to another non‑chosen subsidiary); and (i) the membership interests that the chosen transitional entity holds directly in the non‑chosen subsidiary or in any of the interposed non‑chosen subsidiaries; (ii) the membership interests that each interposed non‑chosen subsidiary holds directly in the non‑chosen subsidiary or in any of the other interposed non‑chosen subsidiaries. #### 701‑25 No operation of value shifting and loss transfer provisions to membership interests in chosen transitional entities If any provision of the Income Tax Assessment Act 1997 would, because of events that happened before the time the transitional group came into existence, apply to a CGT event that happens after that time to change the cost base or reduced cost base of the members’ membership interests in a chosen transitional entity, the provision does not so apply. > Note: For example, such a provision could otherwise apply where a loss transfer or value shift involving the entity has occurred. (1) This section has effect for the purposes of applying section 705‑70 (step 2 of allocable cost amount) of the Income Tax Assessment Act 1997 in relation to a transitional entity. (2) In spite of subsection 705‑70(1A) of that Act, if the amount of an accounting liability of the transitional entity would be different when it becomes an accounting liability of the transitional group, that difference is not taken into account in working out the amount of the liability. #### 701‑35 Act, transaction or event giving rise to CGT event for pre‑formation roll‑over after 16 May 2002 to be disregarded if cost base etc. would be different (a) after 16 May 2002 and before the transitional group came into existence, a CGT event happened in relation to an asset (the roll‑over asset) for which there was: (ii) roll‑over relief under section 40‑340 of that Act in a case covered by item 4 of the table in subsection (1) of that section; and (i) became an asset of the head company when the transitional group came into existence because subsection 701‑1(1) (the single entity rule) of that Act applies; or differs at that time from what it would have been if the act, transaction or event that gave rise to the CGT event had not occurred in relation to the roll‑over asset; then the provisions mentioned in subsection (2) apply as if the act, transaction or event had not occurred in relation to the roll‑over asset. (a) the act, transaction or event mentioned in subsection (1) happened before a demerger and in connection with the demerger; and (b) before the transitional group came into existence, at least one of the following entities ceased to be a member of the demerger group because of the demerger: (i) the originating company in relation to the roll‑over, or the transferor in relation to the roll‑over relief, was a foreign resident; and (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as a transitional foreign‑held subsidiary of the group. #### 701‑40 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to increase terminating values of over‑depreciated assets (1) This section applies if an entity ceases to be a subsidiary member of the transitional group and the requirements of subsections (2) to (4) are satisfied. (2) Just before the entity ceases to be a subsidiary member, it must, disregarding subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997, hold an asset. (a) the asset must have become that of the head company of the transitional group because subsection 701‑1(1) of that Act applied in relation to a transitional entity; and (b) former section 705‑50 of that Act must have reduced by an amount (the reduction amount) the tax cost setting amount for the asset. (4) The asset must, disregarding subsection 701‑1(1) of that Act, have been held at all times by the head company or a subsidiary member of the transitional group from when the transitional group came into existence until the entity ceases to be a subsidiary member of the transitional group. (6) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is increased by so much of the reduction amount as the head company chooses. #### 701‑45 When entity leaves transitional group, head company may choose, for purposes of transitional group’s allocable cost amount, to use formation time market values, instead of terminating values, for certain pre‑CGT assets (b) just before the transitional group came into existence, the entity that became the head company held a pre‑CGT asset; and (d) just before the entity ceases to be a subsidiary member of the group, the asset is still a pre‑CGT asset and is held by the head company only because the entity is taken by subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 to be a part of the head company. (2) If this section applies, the head company may, in relation to the entity’s ceasing to be a subsidiary member, choose that the terminating value for the asset, that is to be used in applying step 1 of the table in section 711‑20 of the Income Tax Assessment Act 1997, is equal to its market value just before the transitional group came into existence. #### 701‑50 Increased allocable cost amount for leaving entity if it takes privatised asset brought into group by chosen transitional entity (1) This section provides for an addition to the step 1 amount for working out under section 711‑20 of the Income Tax Assessment Act 1997 the allocable cost amount for an entity (the leaving entity) that ceases to be a subsidiary member of the transitional group at a time (the leaving time), if: (a) the head company of the group holds an asset at the leaving time because the leaving entity is taken by subsection 701‑1(1) of that Act to be a part of the head company; and (b) the head company started to hold the asset because of that subsection when a chosen transitional entity became a subsidiary member of the group. (b) just after that time, some or all of that entity’s ordinary income and statutory income became assessable income because another entity that later became a member of the transitional group purchased all the membership interests in the entity; and (c) the amount of the purchase price reasonably attributable to the asset exceeded the amount worked out under subsection (3); <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amount for paragraph</span><span> </span><span>(2)(c)</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">If, because of the circumstances described in paragraphs</span><span style="font-weight:bold"> </span><span style="font-weight:bold">(2)(a) and (b):</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-inside:avoid; page-break-after:avoid"><span style="font-weight:bold">The amount is:</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:180.3pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following provisions applied to the entity:</span></p><p class="Tablea"><span>(a) former section</span><span> </span><span>61A of the </span><span style="font-style:italic">Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(b) former Subdivision</span><span> </span><span>57</span><span>‑</span><span>I in Schedule</span><span> </span><span>2D to the</span><span style="font-style:italic"> Income Tax Assessment Act 1936</span><span>;</span></p><p class="Tablea"><span>(c) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(4) of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td><td style="width:148.05pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the amount treated as being the cost of the asset under that provision; and</span></p><p class="Tablea"><span>(b) the total amount treated under that provision as being the deductions for depreciation of the asset before the transition time mentioned in that provision</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span>2</span></p></td><td style="width:180.3pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>One of the following subsections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span><span> applied to the entity:</span></p><p class="Tablea"><span>(a) former subsection</span><span> </span><span>58</span><span>‑</span><span>20(5);</span></p><p class="Tablea"><span>(b) 58</span><span>‑</span><span>70(3)</span></p></td><td style="width:148.05pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>The amount treated as being the cost, or the first element of the cost, of the asset under that subsection</span></p></td></tr></tbody></table> ``` (a) on or after 4 August 1997, an entity (whether the chosen transitional entity or another entity) acquired the asset in connection with the acquisition of a business from the tax exempt vendor (within the meaning of those terms given by Division 58 of the Income Tax Assessment Act 1997, as that Division applied to the acquisition); and (b) because of the acquisition, that Division directly or indirectly affected how much the chosen transitional entity could deduct for the asset; and (c) that effect was partly due to the amount described in an item of the table being worked out for that entity directly or indirectly by reference to a provision of that Division specified in the item; and <table cellspacing="0" cellpadding="0" style="width:366.75pt; border-collapse:collapse"><thead><tr><td colspan="4" style="width:355.95pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Amounts and provisions for different dates of acquisition</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Date of the acquisition</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Amount</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Provision of Division</span><span style="font-weight:bold"> </span><span style="font-weight:bold">58 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> applying to the acquisition and the working out of the amount</span></p></td></tr></thead><tbody><tr><td style="width:6pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:76.7pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>160</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Before 1</span><span> </span><span>July 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>58</span><span>‑</span><span>220</span></p></td></tr><tr><td style="width:6pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:76.7pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>After 30</span><span> </span><span>June 2001</span></p></td><td style="width:80.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>First element of the cost of the asset</span></p></td><td style="width:160.65pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Subsection</span><span> </span><span>58</span><span>‑</span><span>70(5)</span></p></td></tr></tbody></table> ``` > Note 1: As originally enacted, Division 58 of the Income Tax Assessment Act 1997 applied to acquisitions on or after 4 August 1997. That Act was later amended to replace Division 58, with the replacement Division 58 applying to acquisitions on or after 1 July 2001. > Note 2: Division 58 of the Income Tax Assessment Act 1997 may, for example, have indirectly affected how much the chosen transitional entity could deduct for the asset because: (a) that Division affected the amount that could be deducted by an entity that held the asset before the chosen transitional entity; and ### Division 701A—Modified application of provisions of Income Tax Assessment Act 1997 for entities with continuing majority ownership from 27 June 2002 until joining a consolidated group 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (b) a person or persons continued to be the majority owners (see subsection (2)) of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group; (2) A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity. (3) For the purposes of subsection (2), if the interposed entity or any of the interposed entities is a trust that is not a fixed trust: #### 701A‑5 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to trading stock of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is trading stock just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 70‑45 to 70‑70 of that Act. For head company, trading stock to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑7 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to registered emissions units of continuing majority‑owned entity (1) The operation of Part 3‑90 of the Income Tax Assessment Act 1997 is modified in accordance with this section in relation to each asset of a continuing majority‑owned entity that is a registered emissions unit just before the entity becomes a subsidiary member of the entity’s designated group. (b) instead, the value of the asset at the end of the income year that ends, or, if section 701‑30 of that Act applies, of the income year that is taken by subsection (3) of that section to end, is the value determined in accordance with sections 420‑51 to 420‑58 of that Act. For head company, registered emissions units to be retained cost base asset with tax cost setting amount equal to entity’s year‑end valuation (3) For the head company core purposes when the continuing majority‑owned entity becomes a subsidiary member of the designated group, the asset is a retained cost base asset whose tax cost setting amount is equal to the value applicable in accordance with paragraph (2)(b). #### 701A‑10 Modified application of Part 3‑90 of Income Tax Assessment Act 1997 to certain internally generated assets of continuing majority‑owned entity (a) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, a depreciating asset becomes that of the head company of a continuing majority‑owned entity’s designated group when the entity becomes a subsidiary member of that group; and (b) the continuing majority‑owned entity’s terminating value for the asset is less than the asset’s tax cost setting amount; and (d) more than half of the expenditure incurred in constructing or creating the asset was of a revenue nature and allowable as a deduction to the entity (whether or not the continuing majority‑owned entity) that constructed or created the asset; and (e) for every balancing adjustment event occurring for the asset before the continuing majority‑owned entity became a subsidiary member of the group, there was roll‑over relief under section 40‑340 of the Income Tax Assessment Act 1997. (a) while the asset is, because subsection 701‑1(1) of that Act applies, that of the head company of the designated group, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, its tax cost setting amount is taken to be equal to the continuing majority‑owned entity’s terminating value for the asset; and (b) if a balancing adjustment event occurs for the asset, or the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group, and: (iii) if a balancing adjustment event occurs for the asset—the shortfall is allowable as a deduction to the head company for the income year in which it ceases to hold the asset; or (iv) if the head company ceases to hold the asset because an entity ceases to be a subsidiary member of the group—the group’s allocable cost amount worked out under section 711‑30 of the Income Tax Assessment Act 1997 for the entity is increased by the shortfall. Note: The asset’s actual tax cost setting amount would be used for the purpose of working out any balancing adjustment for a balancing adjustment event or for working out the terminating value of the asset under Division 711 of the Income Tax Assessment Act 1997. (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset becomes that of an entity (a new asset holder) other than the head company because subsection 701‑1(1) of the Income Tax Assessment Act 1997 ceases to apply when the entity ceases to be a subsidiary member of the designated group as a result of a third entity (the buyer of the new asset holder) acquiring some or all of the membership interests in the new asset holder; and (i) the buyer of the new asset holder controls (for value shifting purposes) the head company of the designated group, or vice versa; or (ii) a third entity controls (for value shifting purposes) the head company of the designated group and the buyer of the new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the cessation, worked out on the assumption that the head company had acquired the asset for an amount equal to the continuing majority‑owned entity’s terminating value for the asset; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. (a) the asset is acquired by another entity (a new asset holder) from an entity that is a new asset holder under subsection (3) or (5) or a previous application of this subsection; and (i) was a party to the acquisition and, at the time of the acquisition, controlled (for value shifting purposes) the other party; or (ii) was not a party to each acquisition but, at the time of the acquisition, controlled (for value shifting purposes) the parties to the acquisition; and (c) that entity was also the entity whose control (for value shifting purposes) resulted in the control test being satisfied in respect of each previous acquisition or cessation involving a new asset holder; and (i) the asset’s adjustable value (the roll‑over adjustable value) just before the acquisition, worked out on the assumption that every previous new asset holder had acquired the asset for the asset’s roll‑over adjustable value, worked out under subsection (3) or (5) or this subsection, just before it did so; (a) while the asset is held by the new asset holder, for the purpose of working out deductions for the asset’s decline in value under Division 40 of the Income Tax Assessment Act 1997, the acquisition by the new asset holder is taken to have been for an amount equal to the asset’s roll‑over adjustable value asset just before the acquisition; and then the shortfall is allowable as a deduction to the new asset holder for the income year in which it ceases to hold the asset. 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 #### 701B‑1 Modified application of CGT Consolidation provisions to allow immediate availability of capital loss for CGT event L1 (b) members of the consolidated group or the MEC group mentioned in subsection 104‑500(1) of the Income Tax Assessment Act 1997 held all of the membership interests in the entity mentioned in that subsection from the end of 30 June 2002 until the entity became a subsidiary member of the group; and (c) before the end of the fourth income year of the head company of the group ending after the entity became a subsidiary member of the group, the entity ceases to be a subsidiary member; and (d) all of the assets, other than those excepted under subsection (2), that the head company held when the entity became a subsidiary member, because the entity was taken by subsection 701‑1(1) (the single entity principle) of the Income Tax Assessment Act 1997 to be a part of the head company, continued to be held by the head company until the entity ceased to be a subsidiary member. (a) the head company disposed of in the ordinary course of a business that the head company carried on by virtue of the entity being taken by subsection 701‑1(1) of the Income Tax Assessment Act 1997 to be a part of the head company; and (3) If this section applies, neither subsection 104‑500(4) nor subsection 104‑500(5) of the Income Tax Assessment Act 1997 applies in relation to the head company for the income year in which the entity ceases to be a subsidiary member of any later income year. ### Division 701C—Modified application etc. of provisions of Income Tax Assessment Act 1997: transitional foreign‑held membership structures (a) sets out, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, rules that allow certain entities to be subsidiary members of consolidatable groups or consolidated groups where other entities are interposed between them and the head company of the group (see Subdivision 701C‑B); and (b) modifies certain rules in Part 3‑90 of the Income Tax Assessment Act 1997 relating to setting the tax cost of assets to take account of those membership rules (see Subdivision 701C‑C). > Note: This Division has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group (see sections 719‑2 and 719‑10 of this Act). 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership #### 701C‑10 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a company (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(ii) of that Act (see subsection 719‑2(3) of this Act). (b) a trust (a non‑resident trust) that does not meet the requirements in any item of the table in section 703‑25 of the Income Tax Assessment Act 1997. (d) an entity that holds membership interests in an entity interposed between it and the test entity, or in the test entity, only as a nominee of one or more entities each of which is a member of the group, a non‑resident company or a non‑resident trust; or Test entity must be a subsidiary member on assumption that non‑resident companies and non‑resident trusts were subsidiary members (5) At the test time, it must be the case that the test entity would be a subsidiary member of the group if each interposed entity that is a non‑resident company or non‑resident trust were a subsidiary member of the group. (7) If the group is a consolidated group and the test time is the time at which the group comes into existence as a consolidated group, the test time must be before 1 July 2004. (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (d) from the time the group came into existence as a consolidated group until the test time, the test entity must have been a subsidiary member of the group; and (e) at the time the group came into existence as a consolidated group, one or more of the membership interests in the test entity must have been held by an entity of a kind mentioned in subparagraph (c)(i), (ii), (iii) or (iv). #### 701C‑15 Additional membership rules where entities are interposed between the head company and a subsidiary member—case where an interposed entity is a foreign resident and the subsidiary member is a trust or partnership (1) This section describes, for the purposes of item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997, a set of requirements that must be met for an entity (the test entity) to be a subsidiary member of a consolidated group or a consolidatable group at a particular time (the test time). > Note: This subsection applies in relation to a MEC group as if the reference to item 2, column 4 of the table in subsection 703‑15(2) of the Income Tax Assessment Act 1997 were a reference to subparagraph 719‑10(1)(b)(iii) of that Act (see subsection 719‑2(3) of this Act). (3) At the test time, one or more of the interposed entities must be companies that are subsidiary members of the group because the set of requirements in section 701C‑10 are met. Test entity must be a subsidiary member on assumption that head company beneficially owned all membership interests beneficially owned by subsection (3) companies (4) At the test time, it must be the case that the test entity would be a subsidiary member of the group if the head company beneficially owned all the membership interests beneficially owned by each company described in subsection (3). If: (a) an entity is a subsidiary member of a consolidated group in a case where the set of requirements described in section 701C‑10 are met; and (iii) an entity that holds the membership interests only as a nominee of one or more entities each of which is a non‑resident company or a non‑resident trust; or (ii) an entity that is a transitional foreign‑held indirect subsidiary of the group because of another application of this paragraph; Note: In order to be a subsidiary member of the group as required by subparagraph (d)(iii), the transitional foreign‑held indirect subsidiary would need to have satisfied the set of requirements in either section 701C‑10 or 701C‑15 (1) This Subdivision applies if an entity (the transitional foreign‑held joining entity) that is a transitional foreign‑held subsidiary or a transitional foreign‑held indirect subsidiary becomes a subsidiary member of a consolidated group at the time (the formation time) the group comes into existence. (2) The object of this Subdivision is to ensure that, on becoming a subsidiary member at the formation time, the tax cost of the assets of any transitional foreign‑held subsidiary is not set and that the tax cost setting amount for assets of any transitional foreign‑held indirect subsidiary that becomes a subsidiary member at that time takes account of this. (a) section 701‑10 of the Income Tax Assessment Act 1997 (about setting the tax cost of assets that an entity brings into the group); apply, for the purposes of setting the tax cost of an asset of the transitional foreign‑held joining entity at the formation time, as if each subsidiary member of the group that is a transitional foreign‑held subsidiary at the formation time were a part of the head company of the group, rather than a separate entity. > Note 1: This section means that references in those provisions to matters internal to the group operate as if transitional foreign‑held subsidiaries in the group were parts of the head company of the group. For example: (a) provisions operating if the head company holds (whether directly or indirectly) membership interests in another entity operate even if a transitional foreign‑held subsidiary actually holds those interests; and (b) provisions operating if the head company owns or controls another entity operate even if one or more transitional foreign‑held subsidiaries actually own or control that other entity; and (c) provisions operating if an entity is interposed between the head company and another entity operate even if the first entity is actually interposed between a transitional foreign‑held subsidiary and the other entity. > Note 2: If the transitional foreign‑held joining entity is a transitional foreign‑held subsidiary, this section means the assets of the entity do not have their tax cost reset at the formation time. This is because Subdivision 705‑A of the Income Tax Assessment Act 1997, in its application in accordance with Subdivision 705‑B of that Act, resets the tax cost of assets of subsidiary members of a group, but not assets of the head company. Subsection 701‑35(4) of the Income Tax Assessment Act 1997 (setting value of trading stock at tax‑neutral amount) does not apply to the assets of the transitional foreign‑held joining entity if it is a transitional foreign‑held subsidiary. Section 701‑15 of the Income Tax Assessment Act 1997 applies as if the following subsection were added at the end of the section: (a) this section applies to each membership interest in the transitional foreign‑held subsidiary that is held by an entity (an eligible non‑resident) of a kind mentioned in subparagraph 701C‑20(b)(i), (ii), (iii) or (iv) of the Income Tax (Transitional Provisions) Act 1997 in the same way as it applies to a membership interest in the transitional foreign‑held subsidiary that is held by the head company; and (b) for that purpose, the definition of head company core purposes in subsection 701‑1(2) of the Income Tax Assessment Act 1997 applies to the eligible non‑resident in the same way as it applies to the head company. Section 711‑5 of the Income Tax Assessment Act 1997 applies as if the following note were added at the end of the section: > Note: If the leaving entity is a transitional foreign‑held subsidiary (within the meaning of section 701C‑20 of the Income Tax (Transitional Provisions) Act 1997), this Division will, in accordance with subsection 701‑15(4) of this Act (see section 701C‑40 of the first‑mentioned Act), apply to membership interests that an eligible non‑resident mentioned in that subsection holds in the entity in the same way as it applies to membership interests that the head company holds in the entity. (1) The object of this Division is to allow an entity that is a potential subsidiary member of a consolidated group to utilise an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) during a transitional period, rather than have the head company utilise the loss subject to the restrictions in Subdivision 707‑C of the Income Tax Assessment Act 1997. (2) Therefore, this Division allows the head company to prevent the entity from being a subsidiary member of the group, for a transitional period. (1) The Income Tax Assessment Act 1997 and this Act have effect as if an entity (the transitional foreign loss maker) is not a subsidiary member of a consolidated group at a particular time (the transitional time) if: (b) apart from this section, the transitional foreign loss maker would be a subsidiary member of the group at the transitional time; and (d) the head company of the group has made a choice under section 701D‑15 to apply this section to the transitional foreign loss maker; and (2) The continuous ownership condition is satisfied if the transitional foreign loss maker was a wholly‑owned subsidiary of the entity that became the head company of the group throughout the period: (a) the transitional foreign loss maker incurred an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) in respect of the 2001‑02 income year or an earlier income year; and (b) the amount of the overall foreign loss has not been fully taken into account under one or more applications of former section 160AFD of the Income Tax Assessment Act 1936 to the transitional foreign loss maker in relation to an income year or income years ending before the transitional time; and (c) assuming that the transitional foreign loss maker had become a subsidiary member of a consolidated group at the formation time, as a result all or part of the overall foreign loss would have been transferred at that time to the head company of the group under Division 707 of the Income Tax Assessment Act 1997. (ii) assuming that the head company of the group (rather than the transitional foreign loss maker) held that interest or those interests, none of those other entities would be a subsidiary member of the group. (5) To avoid doubt, subsection (1) does not prevent the transitional foreign loss maker from being a member of a consolidatable group at the transitional time for the purposes of: (1) The head company of a consolidated group may make a choice in the approved form to apply section 701D‑10 to another entity. (2) However, the head company cannot make that choice if subsection 701D‑10(1) previously prevented the entity from being a subsidiary member of a consolidated group. (a) the day on which the head company must give the notice under section 703‑58 of the Income Tax Assessment Act 1997 (notice of choice to consolidate); and (a) an asset of the head company because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies; or (b) an asset of another entity, where it became such an asset as a result of that subsection ceasing to apply on the entity ceasing to be a subsidiary member of the group; then, despite certain provisions of that Act applying, in accordance with subsection 701‑55(2) of that Act, as if the asset were acquired for a payment equal to its tax cost setting amount: Note: This means that Division 40 of the Income Tax Assessment Act 1997 continues not to apply to an asset that is a mining, quarrying or prospecting right. (d) subsection 40‑77(2) continues to apply to the asset, but applies as if the reference in that subsection to the cost of the asset were a reference to the cost worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount; and (e) subsection 40‑77(3) continues to apply to the asset, but applies as if the reference in that subsection to the amount included in assessable income under subsection 40‑285(1) of that Act were a reference to the amount so worked out on the basis that the asset were acquired for a payment equal to its tax cost setting amount. (b) after the asset became an asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity became a subsidiary member of the group. It does not matter whether or not the final entity is the same as the head company or the entity mentioned in paragraph (b). > Note: The final entity will be different from the head company if an entity (the leaving entity) took the asset with it when leaving the group, whether or not the leaving entity brought the asset into another consolidated group before the asset came to be held by the final entity. (2) The final entity is entitled to a further deduction under subsection 40‑285(3) of this Act for the balancing adjustment event if the final entity would have been entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 operating at any time before the event occurred. > Note: The final entity will be entitled to the deduction apart from paragraph 701‑55(2)(a) of the Income Tax Assessment Act 1997 only if the entity is treated as having depreciated the asset under former Division 42 of that Act, because of section 701‑5 (the entry history rule) of that Act and perhaps also section 701‑40 (the exit history rule) of that Act. (3) However, the final entity is not entitled to the deduction if, at a time before the balancing adjustment event occurred: (a) the asset became the asset of the head company of a consolidated group because of section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 applying when an entity (the joining entity) became a subsidiary member of the group; and It does not matter whether or not the change in status of the asset described in paragraph (a) of this subsection is the same change as the change in status of the asset described in paragraph (1)(b). > Note: In some cases, section 705‑47 of the Income Tax Assessment Act 1997 reduces the tax cost setting amount for a depreciating asset to the joining entity’s terminating value for the asset, so that subsection (3) of this section will not prevent the final entity from getting the further deduction under subsection 40‑285(3) of this Act. If: (b) because subsection 701‑1(1) (the single entity rule) of the Income Tax Assessment Act 1997 applies, an asset of the entity becomes an asset of the head company of the group; and subsection 40‑285(6) of this Act (about reducing the amount included in assessable income for a balancing adjustment event) applies as if the cost of the asset were equal to the tax cost setting amount applicable in relation to the asset for the purposes of having its tax cost set by section 701‑10 (cost to head company of assets that entity brings into group) of the Income Tax Assessment Act 1997. > Note: The tax cost setting amount applicable in relation to the asset for that purpose is worked out in accordance with Division 705 of the Income Tax Assessment Act 1997. (1) For the purposes of Part 3‑90 of the Income Tax Assessment Act 1997, this section affects whether an interest or right that is held by an entity on or after 1 July 2002 and relates to another entity is a membership interest of the entity in the other entity. (2) Apply Division 974 of the Income Tax Assessment Act 1997 in determining under Subdivision 960‑G of that Act whether the interest or right is a membership interest of the entity in the other entity. > Note: Under Subdivision 960‑G of the Income Tax Assessment Act 1997, a debt interest relating to an entity is not a membership interest in the entity. Division 974 of that Act explains what a debt interest is. (3) This section has effect whether or not the debt and equity test amendments (as defined in item 118 of Schedule 1 to the New Business Tax System (Debt and Equity) Act 2001) apply to transactions in relation to the interest or right at the relevant time. Despite the amendments of section 703‑35 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (4) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) If an entity (the joining entity) to which section 40‑75 of this Act applied becomes a subsidiary member of a consolidated group at a time (the joining time), this Subdivision applies in relation to: (ii) became assets of the head company of the group at the joining time because of section 701‑1 (Single entity rule) of the Income Tax Assessment Act 1997 operating in relation to the joining entity; and (b) notional assets that sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act treat an entity as holding because of expenditure relating to such depreciating assets; (2) The main object of this Subdivision is to ensure that entities are allowed only an appropriate amount of deductions in connection with such depreciating assets and such expenditure. (1) The main object of this section is to ensure that a depreciating asset’s tax cost is set, and other matters relevant to working out the deductions of the head company of the consolidated group for the decline in value of the asset are dealt with, so as to: (a) ensure that the head company does not get excessive deductions on account of expenditure (by any entity) relating to the asset; and (b) reflect the deductions of an entity for a period ending before the joining time for expenditure relating to the asset; and (c) ensure that the effective life of the asset for the head company reflects the rate or rates at which the joining entity was able to deduct expenditure relating to the asset (whether or not the expenditure formed part of the cost of the asset). (2) If the joining entity could not deduct an amount under Subdivision 40‑B of the Income Tax Assessment Act 1997 for the income year that includes the joining time for the decline in value of a depreciating asset, subsection 701‑55(2) of that Act has effect as if the prime cost method for working out the decline in value of the asset applied just before the joining time. (3) Division 705 of the Income Tax Assessment Act 1997 has effect as if the adjustable value of a depreciating asset just before and at the joining time were increased by the amount described in subsection (4), if section 40‑35, 40‑37, 40‑40 or 40‑43 treated the joining entity as holding a notional asset. > Note: This affects not only the adjustable value of the depreciating asset but also the joining entity’s terminating value for the asset (which section 705‑30 of that Act defines as being equal to the asset’s adjustable value just before the joining time). (4) The amount of the increase is so much of the adjustable value of the notional asset just before the joining time as reasonably relates to the depreciating asset. (5) Division 705 of the Income Tax Assessment Act 1997 has effect as if the cost of a depreciating asset were increased by expenditure incurred that did not form part of the asset’s cost worked out under Division 40 of that Act but would have if it had been incurred just before the joining time under a contract entered into after 30 June 2001. (6) Division 705 of the Income Tax Assessment Act 1997 has effect as if deductions relating to expenditure described in subsection (5) were deductions for the decline in value of the depreciating asset. (a) deductions under former Subdivision 330‑A, 330‑C or 330‑H of the Income Tax Assessment Act 1997, or a corresponding previous law, for the expenditure; and (b) deductions under Division 40 of that Act for the decline in value of a notional asset that section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated an entity as holding because of the expenditure. (7) If a depreciating asset’s tax cost setting amount does not exceed the joining entity’s terminating value for the asset, Division 40 of the Income Tax Assessment Act 1997 has effect as if the effective life of the asset were such period as is reasonable, having regard to the following: (b) the remainder of the effective life, worked out just before the joining time, of each notional asset (which section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats an entity as holding wholly or partly because of expenditure relating to the depreciating asset); > Note 1: The effective life of the depreciating asset was set on 1 July 2001 by subsection 40‑75(4) of this Act, but may have been reset since under Subdivision 40‑B of the Income Tax Assessment Act 1997. > Note 2: The effective life of a notional asset is specified by whichever one of sections 40‑35, 40‑37, 40‑40 and 40‑43 of this Act is relevant to the notional asset. (a) a depreciating asset’s tax cost setting amount would be greater than the joining entity’s terminating value for the asset; and (9) Section 705‑55 of the Income Tax Assessment Act 1997 has effect as if subsection (8) of this section were included in section 705‑45 of that Act. > Note: This affects the order of reductions in the asset’s tax cost setting amount under subsection (8) of this section and section 705‑40 of the Income Tax Assessment Act 1997. (a) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treats the head company of the consolidated group as holding a notional asset at the joining time because expenditure is taken under section 701‑5 (Entry history rule) of the Income Tax Assessment Act 1997 to be expenditure of the head company; and (b) section 40‑35, 40‑37, 40‑40 or 40‑43 of this Act treated the joining entity as holding a notional asset just before the joining time because of the expenditure; (2) The object of this section is to ensure, by reducing the adjustable value of a notional asset of the head company, that the head company cannot get both: (3) The opening adjustable value of the head company’s notional asset for the income year that includes the joining time is so much of the adjustable value of the joining entity’s notional asset just before the joining time as does not reasonably relate to any depreciating asset. > Note: This offsets the increases in adjustable value of the head company’s depreciating assets under subsection 705‑305(3). (ii) an asset became that of the leaving entity because section 701‑1 (the single entity rule) of the Income Tax Assessment Act 1997 ceased to apply when the leaving entity ceased to be a subsidiary member; (iii) the asset had become that of the head company because that section applied when the joining entity to which Subdivision 707‑A of that Act applies (whether or not the same entity as the leaving entity) became a subsidiary member. 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value #### 707‑325 Increasing the available fraction for a bundle of losses by increasing the real loss‑maker’s modified market value (1) This section affects the working out of the available fraction for a bundle of losses under subsection 707‑320(1) of the Income Tax Assessment Act 1997 if: (a) the transferee mentioned in that subsection chooses under subsection (5) of this section to work out the available fraction using a percentage of the modified market value of a company (the value donor) other than the real loss‑maker mentioned in subsection 707‑315(1) of that Act for the bundle; and (b) both the real loss‑maker and the value donor became members of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (which is the initial transfer time mentioned in that subsection in connection with the bundle) the group became a consolidated group; and (ca) neither the real loss‑maker nor the value donor has been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (ii) a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (e) the value donor would have been able to transfer the loss to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997 at the initial transfer time had the value donor: (ea) neither of these sections applies in relation to the value donor as joining entity at the time the group became a consolidated group: (ii) section 713‑540 (Losses of entities whose membership interests are segregated exempt assets of life insurance company); and (2) It must have been possible for the real loss‑maker to have transferred the loss to the value donor under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (3) Work out the available fraction for the bundle of losses as if there were added to the modified market value of the real loss‑maker at the initial transfer time the amount worked out using the formula:  > Note: The amount worked out using the formula will be nil if the value donor’s modified market value at the initial transfer time is nil. Even if the amount is nil, section 707‑327 may treat losses transferred by the value donor to the transferee as if they were included in the bundle of losses transferred by the real loss‑maker to the transferee. > total of real loss‑maker’s non‑foreign losses in bundle is the total of the amount of each loss that is described in paragraph (1)(d). (5) The transferee may choose to use a fixed percentage (greater than 0% and not more than 100%) of the value donor’s modified market value to work out the available fraction for the bundle. The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (7) If subsection (3) applies 2 or more times in relation to the same value donor but different real loss‑makers, the transferee cannot choose for those applications percentages of the value donor’s modified market value at the initial transfer time that result in the total of the amounts worked out under those applications exceeding that value. (8) Work out the available fraction for a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from the value donor at the initial transfer time as if the value donor’s modified market value at the time were reduced by the amount worked out under subsection (3). (9) This section has effect for working out the available fraction of a bundle of losses only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) included in a bundle of losses: (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. #### 707‑326 Events involving only value donor and real loss‑maker not covered by rule against inflation of modified market value (1) This section affects the calculation of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of the Income Tax Assessment Act 1997 for a bundle of losses. This section affects the calculation: (a) only if section 707‑325 of this Act applies for the purposes of working out the available fraction for the bundle; and (b) only for the purposes of working out the available fraction for the bundle to affect the utilisation of tax losses, film losses and net capital losses in the bundle (and not any overall foreign losses, as defined in former section 160AFD of the Income Tax Assessment Act 1936, in the bundle). > Note: This section does not affect the calculation of the real loss‑maker’s modified market value for other purposes (such as the real loss‑maker being a value donor for the purposes of another application of section 707‑325 of this Act). (3) One condition is that the event was an injection of capital directly into the real loss‑maker by the value donor mentioned in section 707‑325 of this Act. (c) that would have caused subsection 707‑325(2) of the Income Tax Assessment Act 1997 to operate in working out the real loss‑maker’s modified market value (even if no other events described in subsection 707‑325(4) of that Act had occurred), apart from this section. (a) operates for the purposes of working out the value donor’s modified market value because of an event that involved an entity other than the value donor and the real loss‑maker (whether or not the event also involved either the value donor or the real loss‑maker); or (1) This section has effect for the purposes of working out under Subdivision 707‑C of the Income Tax Assessment Act 1997 how much of a tax loss, film loss or net capital loss can be utilised if: (a) the available fraction for a bundle of other losses is worked out, because of section 707‑325, as if there were added to the modified market value of the real loss‑maker of the other losses an amount worked out under that section by reference to the value donor’s modified market value; and (c) the loss is not a loss whose utilisation is affected by section 707‑350 (about utilisation of certain losses originally made for an income year ending on or before 21 September 1999); and (d) each company covered by subsection (2) would have been able to transfer the loss under Subdivision 707‑A of that Act at the initial transfer time had the company: > Note: This section has effect even if the amount added to the real loss‑maker’s modified market value under section 707‑325 is nil because the value donor’s modified market value is nil. (b) each other company (if any) for which it is the case that the available fraction for the bundle is worked out, because of another application of section 707‑325, as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the company. (3) It must have been possible for the value donor to have transferred an amount (greater than a nil amount) of the loss to each company covered by subsection (2) under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997 for an income year consisting of the period described in section 707‑328 had the conditions in that section existed. (4) If the transferee mentioned in subsection 707‑325(1) chooses, sections 707‑310, 707‑335 (except paragraph 707‑335(2)(a)) and 707‑340 of the Income Tax Assessment Act 1997 (and subsections 707‑315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: > Note: This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (5)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707‑325(1)(d) and (e) and subsection 707‑325(2) in an application of section 707‑325 separate from the application of that section mentioned in paragraph (1)(a) of this section. > Note: This means that a loss that provided a basis for section 707‑325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. (b) in connection with the requirement that it must have been possible for a company (the notional transferor) to transfer to another company (the notional transferee) for an income year a loss under Subdivision 170‑A or 170‑B of the Income Tax Assessment Act 1997. (b) ends immediately after the initial transfer time mentioned in subsection 707‑320(1) of the Income Tax Assessment Act 1997. > Note: For the purposes of identifying the trial year using the definition in section 707‑120 of the Income Tax Assessment Act 1997, the notional transferor mentioned in this section is the same as the joining entity mentioned in that section, and the initial transfer time mentioned in this section is the same as the joining time mentioned in that section. (3) The first condition is that neither the notional transferor nor the notional transferee became a subsidiary member of a consolidated group before, at or after the initial transfer time mentioned in the relevant subsection. (4) The second condition is that neither of those Subdivisions had been amended to provide only for transfers involving an Australian branch (as defined in section 160ZZV of the Income Tax Assessment Act 1936) of a foreign bank. (5) The third condition is that the notional transferee’s income or gains for the income year were great enough not to prevent the transfer. (6) The fourth condition is that those Subdivisions operated as if the notional transferor had made the loss for the income year if the notional transferor had actually made it for an income year ending just before the initial transfer time. (1) Subsection (3) of this section affects the calculation, under section 707‑325 of the Income Tax Assessment Act 1997 and section 707‑325 of this Act, of the modified market value of the real loss‑maker mentioned in subsection 707‑315(1) of that Act for a bundle of losses, but only if: (a) the requirement in subsection (2) of this section is met in relation to each other company that became a member of the group mentioned in subsection 707‑315(1) of that Act in connection with the bundle at the time (the formation time) the group became a consolidated group; and (b) the provisions described in subsection 707‑327(4) of this Act operate (because of that subsection) in relation to each loss of such a company that is covered by paragraphs 707‑327(1)(b) and (c) of this Act as if the bundle included the loss; and (d) subsection 707‑325(2) of that Act does not operate, for the purposes of working out the modified market value of an entity that became a member of the group at the formation time, because of an event that involved an entity that did not become a member of the group then; and (e) the transferee mentioned in subsection 707‑325(1) of this Act chooses that this section apply in relation to the real loss‑maker. (2) Section 707‑325 of this Act must apply in relation to the other company (as value donor) so that the available fraction for the bundle is to be worked out as if there were added to the real loss‑maker’s modified market value an amount worked out by reference to the other company’s modified market value at the initial transfer time. (3) Disregard for the purposes of subsection 707‑325(2) of the Income Tax Assessment Act 1997 an event that is described in subsection 707‑325(4) of that Act and was either: (a) an injection of capital into an entity that became a member of the group at the formation time by another such entity; or > Note: Disregarding such an event could have a direct or indirect effect on the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle in one of these ways: (a) it could directly affect the real loss‑maker’s modified market value calculated under section 707‑325 of the Income Tax Assessment Act 1997, if the real loss‑maker was involved in the event; (b) it could have an indirect effect by affecting the value donor’s modified market value calculated under that section and used under section 707‑325 of this Act to add an amount to the real loss‑maker’s modified market value for those purposes. (i) the day on which the transferee lodges its income tax return for the first income year for which it utilises (except in accordance with section 707‑350) losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997; and > Note: For the purposes of subparagraph (4)(a)(i), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (5) This section affects the modified market value of an entity that became a member of the group at the formation time only for the purposes of calculating the real loss‑maker’s modified market value for the purposes of working out the available fraction for the bundle. (6) This section has effect for working out the available fraction of the bundle only so far as it affects the utilisation of a tax loss, film loss or net capital loss. It does not affect the utilisation of an overall foreign loss (as defined in former section 160AFD of the Income Tax Assessment Act 1936) that: (b) was transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 from an entity other than the real loss‑maker. (a) utilisation of the overall foreign loss is limited by the available fraction for the bundle worked out apart from this section; and (b) utilisation of the loss of the other sort is limited by the available fraction for the bundle as affected by this section, if applicable. (7) This section can operate in relation to only one bundle of losses transferred to the transferee under Subdivision 707‑A of the Income Tax Assessment Act 1997. Disregard an event that is described in subsection 707‑325(4) of the Income Tax Assessment Act 1997 and occurred on or before 8 December 2000 in working out under section 707‑325 of that Act the modified market value of an entity at the time it becomes a member of a consolidated group on a day before 8 December 2004. (1) This section affects the way in which one or more losses of one particular sort in a bundle of losses transferred under Subdivision 707‑A of the Income Tax Assessment Act 1997 before 1 July 2004 can be utilised by the transferee if: (a) they were actually made (disregarding that Subdivision) by a company (the real loss‑maker) for an income year ending on or before 21 September 1999; and (b) they were transferred at the time (the initial transfer time) the transferee became the head company of a consolidated group; and (ii) the conditions in one or more of paragraphs 165‑15(1)(a), (b) and (c) did not exist in relation to the real loss‑maker; and (da) the real loss‑maker has not been, at any time before the initial transfer time, a transitional foreign loss maker prevented by subsection 701D‑10(1) from being a subsidiary member of a consolidated group; and (2) The transferee may utilise for an income year the losses only after utilising for the year losses (the non‑transferred losses) of the same sort that the transferee made without a transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 (even if the income year for which the transferee made the losses is earlier than an income year for which the transferee made any of the non‑transferred losses). (3) The amount of the losses that the transferee may utilise for an income year cannot exceed the amount worked out for the year using the table. <table cellspacing="0" cellpadding="0" style="width:367.8pt; border-collapse:collapse"><thead><tr><td colspan="3" style="width:357.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="TableHeading"><span>Limit on utilising the losses</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Item</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">For this income year:</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">The amount of the losses that the transferee may utilise cannot exceed:</span></p></td></tr></thead><tbody><tr><td style="width:20.1pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:120.2pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The first income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span style="font-size:8pt; vertical-align:2pt">1</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The second income year ending after the initial transfer time</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) </span><span style="font-size:8pt; vertical-align:2pt">2</span><span>/</span><span style="font-size:8pt">3</span><span> of the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the amount of the losses utilised for the income year mentioned in item</span><span> </span><span>1</span></p></td></tr><tr><td style="width:20.1pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:120.2pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The third income year ending after the initial transfer time, or a later income year</span></p></td><td style="width:195.4pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.35pt; padding-left:5.35pt; vertical-align:top"><p class="Tabletext"><span>The difference between:</span></p><p class="Tablea"><span>(a) the total of the amounts of the losses that were transferred to the transferee; and</span></p><p class="Tablea"><span>(b) the total of the amounts of the losses utilised for earlier income years ending after the initial transfer time</span></p></td></tr></tbody></table> ``` (4) Subdivision 707‑C of the Income Tax Assessment Act 1997 operates as if the losses had been made by the transferee without being transferred under Subdivision 707‑A of that Act. > Note: This has 2 effects. First, Subdivision 707‑C of that Act does not limit utilisation of the losses. Secondly, it affects the limit that Subdivision sets on utilising other losses in any bundle (because that limit depends on the transferee’s income and gains remaining after utilisation of losses that have not been transferred under Subdivision 707‑A of that Act). (5) The transferee may choose that this section apply to the utilisation for any income year of all losses (of any sort) in the bundle that meet the conditions in paragraphs (1)(a), (b), (c) and (d). The transferee may do so only by the later of: (a) the day on which it lodges its income tax return for the first income year for which it could utilise any losses transferred to it under Subdivision 707‑A of the Income Tax Assessment Act 1997 (as described in subsection (1) or otherwise); and > Note: For the purposes of paragraph (5)(a), ignore losses to which section 713‑535 (Losses of entities whose membership interests are virtual PST assets of life insurance companies) of the Income Tax Assessment Act 1997 applies. See section 707‑355 of this Act. (6) The choice has effect for that income year and all later income years (and cannot be revoked after 31 December 2005). (7) This section does not limit the transfer under Subdivision 707‑A of the Income Tax Assessment Act 1997 of any of the losses from the transferee to another company. In working out when a choice may be made under subsection 707‑325(5), 707‑327(5), 707‑328A(4) or 707‑350(5), ignore losses to which section 713‑535 of the Income Tax Assessment Act 1997 applies. > Note: That section deals with losses transferred under Subdivision 707‑A of that Act from certain wholly‑owned subsidiaries of life insurance companies that are members of a consolidated group. Section 707‑405 of the Income Tax Assessment Act 1997 has effect in relation to this Division, and Division 170 of that Act as it has effect for the purposes of this Division, in the same way as that section has effect in relation to Division 707 of that Act. (1) This section reduces the adjustable value of a notional asset that section 40‑35, 40‑37, 40‑38, 40‑40 or 40‑43 treats the head company of a consolidated group as holding, if: (b) that section treats the leaving entity as holding a notional asset because of section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997. > Note: Section 701‑40 (Exit history rule) of the Income Tax Assessment Act 1997 treats as expenditure of the leaving entity certain expenditure incurred before the leaving time in relation to an asset or business that was an asset or business of the leaving entity at the leaving time. (2) The adjustable value of the head company’s notional asset is reduced at the leaving time by the adjustable value of the leaving entity’s notional asset at that time. The object of this Subdivision is to give an opportunity to a group of entities that includes a life insurance company to rearrange the assets of the group for the purposes of one or more of them becoming members of a consolidated group in a way that does not attract any immediate taxation consequences. (1) This Subdivision provides for a deferral of the taxation consequences that would occur because of an event (the deferral event) happening involving an entity (the originating entity) and another entity (the recipient entity) if: (a) the event occurs in connection with a life insurance company (the member life insurance company) becoming a member of a consolidated group; and (2) If the originating entity is a company, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (3) If the originating entity is a trust, the deferral event referred to in subsection (1) is a CGT event referred to in subsection (4) happening to a CGT asset (also the original asset) where, apart from this Subdivision, the happening of the event would have resulted in: (b) CGT event C2, but only if the CGT asset that ends is a unit in a unit trust that is replaced by an equivalent membership interest (the replacement interest) in a company or in another trust. (a) a life insurance company transfers an asset (also the original asset) to its virtual PST or from its virtual PST where, apart from this Subdivision, section 320‑200 of the Income Tax Assessment Act 1997 would apply to the transfer; or (b) a life insurance company transfers an asset (also the original asset) to its segregated exempt assets where, apart from this Subdivision, section 320‑255 of the Income Tax Assessment Act 1997 would apply to the transfer; where the transfer (also the deferral event) is made in connection with the life insurance company (also the member life insurance company) becoming a member of a consolidated group. (1) This Subdivision applies only if the originating entity (for a section 713‑505 case) or the life insurance company (for a section 713‑510 case) chooses that it apply. (a) by the day the originating entity or the life insurance company, or the head company of the consolidated group of which it is a member, lodges its income tax return for the income year in which the deferral event happened; or (i) a life insurance company that has virtual PST assets or segregated exempt assets and that is a member of a consolidatable group; or (ii) an entity that is unable to be a member of the same consolidatable group as a life insurance company because of section 713‑510 of the Income Tax Assessment Act 1997; or (iii) an entity that is, directly or indirectly, a subsidiary of a life insurance company and is a member of the same consolidated group as the life insurance company; and (b) the originating entity and the recipient entity must be members of the same consolidatable group or consolidated group or, if they are not, they would have been apart from section 713‑510 of the Income Tax Assessment Act 1997; and (a) the total transfer values of the virtual PST assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer; and (b) the total transfer values of the segregated exempt assets of the member life insurance company just before a transfer of assets to which this Subdivision applies must be the same as the total transfer values of those assets just after the transfer. (b) if the head company of the consolidated group of which the member life insurance company is a member has a substituted accounting period—the end of the head company’s income year in which 30 June 2004 occurs. This Act, and the Income Tax Assessment Act 1997, apply to the transfer of an asset to which this Subdivision applies as if the asset had been transferred just before the member life insurance company became a member of the consolidated group. (i) any amount (other than a capital gain) that would have been included in the originating entity’s assessable income (the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (the deferred gain) that the originating entity would have made as a result of the deferral event is disregarded; and (i) any amount (other than a capital gain) that would have been included in the member life insurance company’s assessable income (also the deferred amount) as a result of the deferral event is not so included; and (ii) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (a) any amount that would have been included in the member life insurance company’s assessable income (also the deferred amount) under paragraph 320‑15(e) or (g) of the Income Tax Assessment Act 1997 as a result of the deferral event is not so included; and (b) any capital gain (also the deferred gain) that the member life insurance company would have made as a result of the deferral event is disregarded. (1) This section operates if, after the deferral event happens, another event (the new event) happens where the new event is: (b) the recipient entity ceasing to be a member of the consolidated group of which the member life insurance company is a member; or (i) the original asset being transferred to or from the company’s virtual PST under section 320‑180, 320‑185 or 320‑195 of the Income Tax Assessment Act 1997; or (ii) the original asset being transferred to or from the company’s segregated exempt assets under section 320‑235, 320‑240 or 320‑250 of that Act; or (a) the originating entity must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the originating entity is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. > Note: If the originating entity is a subsidiary member of a consolidated group, the head company of the group will have the amount included in its assessable income or will make the capital gain. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (4) For a section 713‑505 case where the originating entity is a life insurance company or a trust and the deferred amount or the deferred gain relates to an asset that was a virtual PST asset at the time when the deferral event happened, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (a) the member life insurance company must include the deferred amount in its assessable income for the income year in which the new event happens; or (b) the member life insurance company is taken, just before the new event happened, to have made a capital gain equal to the deferred gain. (6) In addition, if the deferral event involved the transfer of assets from the member life insurance company’s virtual PST, an amount equal to the deferred amount or deferred gain is taken to be an amount of assessable income to which subsection 320‑205(3) of the Income Tax Assessment Act 1997 applies for the relevant entity. (1) For a section 713‑505 case, the recipient entity must, if it is not a member of the same consolidated group as the originating entity when the new event happens, notify the originating entity in the approved form of the happening of the new event within 60 days after the new event happens. The Income Tax Assessment Act 1997 applies as if the capital gain referred to in paragraph 713‑535(2)(b), (3)(b) or (5)(b) were a discount capital gain if: (a) an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group at a time (the leaving time); and (b) but for the cessation of membership and section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the group would be subject to a balancing adjustment under item 104 of Schedule 1 to the Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 for an income year ending after the leaving time. (2) Despite section 701‑40 of the Income Tax Assessment Act 1997 (the exit history rule), the head company of the consolidated group continues to be subject to the balancing adjustment for income years ending after the leaving time. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity becomes a member of a consolidated group, if, before the commencement of the provision, the Commissioner is given notice under Division 703 that the entity has become a member of the group: (2) A reference in each of those provisions to the end of 90 days after the Commissioner is given notice under Division 703 that the entity has become a member of the group has effect as if it were a reference to the end of 90 days after the commencement of the provision. (1) This section extends the time given by each of the following provisions of the Income Tax Assessment Act 1997 for making a choice because an entity ceases to be a subsidiary member of a consolidated group at the leaving time, if the leaving time is before the commencement of the provision: (2) A reference in each of those provisions to the end of 90 days after the leaving time has effect as if it were a reference to the end of 90 days after the commencement of the provision. Sections 716‑340 and 716‑345 of the Income Tax Assessment Act 1997 operate in relation to a thing mentioned in column 1 of an item of the table in the same way as they operate in relation to a thing mentioned in column 2 of the item. <table cellspacing="0" cellpadding="0" style="border-collapse:collapse"><thead><tr><td colspan="3" style="width:345.4pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="TableHeading"><span>Extended operation of sections of the </span><span style="font-style:italic">Income Tax Assessment Act 1997</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold"></span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 1</span><br><span style="font-weight:bold">Sections</span><span style="font-weight:bold"> </span><span style="font-weight:bold">716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">340 and 716</span><span style="font-weight:bold">‑</span><span style="font-weight:bold">345 of the </span><span style="font-weight:bold; font-style:italic">Income Tax Assessment Act 1997</span><span style="font-weight:bold"> operate in relation to:</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext" style="page-break-after:avoid"><span style="font-weight:bold">Column 2</span><br><span style="font-weight:bold">In the same way as they operate in relation to:</span></p></td></tr></thead><tbody><tr><td style="width:5.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>1</span></p></td><td style="width:161.45pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Former section</span><span> </span><span>46</span><span>‑</span><span>90 of that Act</span></p></td><td style="width:156.9pt; border-top:1.5pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Section</span><span> </span><span>40</span><span>‑</span><span>455 of that Act</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>2</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software pool created under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>A software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>3</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:0.75pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Expenditure allocated to a software development pool</span></p></td></tr><tr><td style="width:5.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>4</span></p></td><td style="width:161.45pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>Software, expenditure on which was in a software pool under former Subdivision</span><span> </span><span>46</span><span>‑</span><span>D of that Act</span></p></td><td style="width:156.9pt; border-top:0.75pt solid #000000; border-bottom:1.5pt solid #000000; padding-right:5.4pt; padding-left:5.4pt; vertical-align:top"><p class="Tabletext"><span>In</span><span>‑</span><span>house software, expenditure on the development of which is allocated to a software development pool</span></p></td></tr></tbody></table> ``` (1) This Part (other than Division 701B, Division 703 and this Division) has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (3) For the purposes of subsection (1), a reference in this Part (other than in Division 703 and this Division) to a provision in: Section 703‑30 of this Act has effect in relation to a MEC group in the same way in which it has effect in relation to a consolidated group. (2) To avoid doubt, for the purposes of those sections, the test entity cannot be a subsidiary member of the group if the group came into existence on or after 1 July 2004. (2) For the purposes of that subsection, in determining whether an entity was at a particular time (the ownership time) a wholly‑owned subsidiary of the entity that became the head company of the group (the head entity), make the assumption in subsection (3). (3) The assumption is that the head entity owned at the ownership time each membership interest covered by subsection (4). (4) A membership interest is covered by this subsection if it was beneficially owned at the ownership time by any entity that became an eligible tier‑1 company of the group at the formation time. Despite the amendment of section 719‑30 of the Income Tax Assessment Act 1997 made by Schedule 1 to the Tax Laws Amendment (2009 Budget Measures No. 2) Act 2009, subsection (2) of that section continues to apply, from the commencement of that Schedule, to each share and membership interest that it applied to just before that commencement. (1) Section 719‑160 of the Income Tax Assessment Act 1997 has effect in relation to the provisions of this Act mentioned in subsection (2) in the same way as that section has effect in relation to the provisions mentioned in subsection 719‑160(3) of the Income Tax Assessment Act 1997. (3) However, that effect of section 719‑160 of the Income Tax Assessment Act 1997 is subject to modifications set out in this Division. (2) Paragraphs 701‑1(2)(b) and (3)(b) of this Act have effect as if a reference in those paragraphs to the future head company were a reference to any entity that became a member of the group as an eligible tier‑1 company at the time the MEC group came into existence. (a) the entity and one or more other entities were members of a potential MEC group as eligible tier‑1 companies, throughout the period: (ii) the entity would be covered by subparagraph (i), if it were assumed that all of the membership interests that were beneficially owned by any of those other entities at that time were owned by a single one of those other entities; and (c) the entity continued to satisfy either of the conditions mentioned in paragraph (b) at all times throughout the period: (c) when the transitional group came into existence, the test entity was a subsidiary member of the group, other than as: (2) That paragraph applies as if the reference in that paragraph to the entity that became the head company were a reference to any entity that became a member of the group, and that was an eligible tier‑1 company, at the time the transitional group came into existence. To avoid doubt, sections 707‑325 and 707‑327 do not apply for the purposes of working out the available fraction for the bundle of losses that are taken under subsection 719‑305(2) of the Income Tax Assessment Act 1997 to be transferred under Subdivision 707‑A of that Act. Subsection 719‑325(7) of the Income Tax Assessment Act 1997 does not apply if the revocation of the choice mentioned in that subsection takes place before 1 January 2006. (1) A reference in an agreement to item 25 of the table in subsection 721‑10(2) of the Income Tax Assessment Act 1997 is taken, from the commencement of this section, to be a reference to item 3 of that table, if: (1) Division 723 applies to a realisation event happening on or after 1 July 2002 to a CGT asset that, at the time of the event: